Tag: trading

Categories
Forex Videos

Forex Options Market review 05-06-2020 – Making Consistent Profits

https://youtu.be/FB5MR5rOlLM

https://youtu.be/FB5MR5rOlLM

 

FX Options Market Combined Volume Expiries. A weekly retrospective review for the financial week ending: 05, 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 05th 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.


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 week’s option maturities to see if they affected price action.


On Monday, the 1st June Kevin’s early morning analysis suggested the euro USD pair was overbought and had the potential for a pullback to the 1.1100 maturity at the 10 AM new york cut.


In this picture, we can see the same pair where the exchange rate was 1.1127 at the cut. You will, however, note that the price action had previously gravitated to 1.1100 before moving higher by just 27 pips at the maturity.
Tuesday was light on the options maturity calendar, and so let’s move straight into Wednesday.


We have the US dollar Japanese yen pair with Kevin’s early analysis suggesting price would

move higher to the resistance line before falling lower to one of the two maturities at 108.70 or 108.50.


Here we can see a later slide of the pair which ran exactly as predicted and where the exchange rate was ranging between the two red maturities.

Here we can see that the price hit 108.66 at the 10 AM cut. Just a few pips in-between the two.

Still, on Wednesday, we had a slew of options between 1.1175 and 1.1220, and price action remained concentrated around these levels.


Price hit 1.1215 at the 10 AM cut, which was an official strike.

 


Again on Wednesday, we had a maturity at 1.2560 for cable. Kevin’s early technical analysis here where he suggested the price was capped and due for a pullback.


As you can see here, price action a few hours later confirmed the analysis with the exchange rate hitting 1.2566 at the cut. Just six pips away from the maturity.


On Thursday, Kevin’s early analysis of the EUR-USD pair was that it was oversold on the one hour chart and that there could be a great deal of volatility after the Eurozone interest rate decision and US jobs data.


Indeed we see that volatility was born out in this chart at just before the time of the maturity.


Price hit 1.1268 at the time of the cut, where the exchange rate hit 1.1268, just 23 pips above the 1.1245 maturity. This might suggest option maturities play a part in even the most volatile trading sessions. Because the EUR-USD pair was at multi-month highs, we can estimate that most of the options were calls, where all traders would have been in the money at the cut.

 

On Friday, we have the Euro us dollar pair in focus again with Kevin’s analysis suggesting the pair was overbought, and in fact, the pair did pull back in volatile trading.

 

Price action for the pair hit 1.1297 at the cut. Just three pips below the option at 1.1300, which Kevin had labeled in red.
All in all, this was a very successful week where our analysis and option maturities levels have helped traders make profitable trades in this very difficult market.

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 Videos

Forex Fundamental Analysis For Novices Exports & Trade Balance

https://youtu.be/pNxKvYHL1JY

https://youtu.be/pNxKvYHL1JY

Fundamental Analysis For Novices Exports & Trade Balance

Thank you for joining our educational video on fundamental analysis for novices. In this presentation, we will be looking at exports and trade balance. Today we will be looking at a snapshot of this data as it is due on an economic calendar and pertaining to the country of Germany.


The best way to approach trading is to plan your day and week in advance, and one of the best tools that you can utilise here is the economic calendar, which is provided by most brokers.

 


Always check that you are looking at the correct day’s economic releases.


Always keep a careful eye out for the level of impact for any data release pertaining to the financial asset which you want to trade. The more importance attached to the impact, the greater amount of volatility which could occur after it’s release.


In this example, we will be looking for a couple of days ahead to Tuesday, June 9th, and paying particular interest to German imports and exports and trade balance.
As we can see here, we are expecting for economic data releases for German exports, month on month for April, where the impact is low and where we have a previous month of March coming in at – 11.8 with a consensus of – 5% expected for the release at 7:AM CEST.
The trade balance for April has more significance associated to it, where we can see a 12.8 billion euros surplus for the month of March and where this is anticipated to rise to 18.9 billion Euros by economists and analysts.

So what do all these mean for the German economy and also for the Euro currency?
Firstly the information is collected and released by Statistisches Bundesamt Germany and is subject to an embargo.
The first segment exports, which is expected to come in at – 5% for April, provides details of All goods and services which were exported i.e., sold outside of the country of Germany.
Countries’ exports are extremely important to their economy because it influences the level of economic growth and provides a picture of employment. The bigger the export figure, the healthier an economy is likely to be.
In the post-war period, lower transportation costs have made it much cheaper to export to other countries around the globe. This globalization, as it is known, has an effect of making international trade far easier.

The second element is the trade balance, and this is more important, and this has a greater impact significance because now we are looking at the difference between what a country exports and what it imports.
Germany is the biggest economy within the Eurozone. Typically it exports more than it imports.

Therefore traders and economists will be looking for a positive figure on release because this shows that there is a trade surplus. A negative value would show a trade deficit.
The next segment is the current account, which measures the difference in value between exported and imported goods, services, and cross border interest payments. It also includes payments to overseas investors and other payments, such as foreign aid.
Again we are looking for a surplus or a deficit, which will show whether the country is a net exporter, which is good for their economy, and thus the Euro, or if it is a net importer of goods and services, which is bad for their economy and thus the Euro currency exchange rate.
The last segment is imports month on month for April. This provides a percentage plus or minus for the value of imports of goods and services from countries outside of Germany for the previous month.

How to trade Exports and trade data releases. Remember, a negative value on the trade balance shows more goods are being imported than exported; this is bad for an economy and affects growth. As a result, the Euro might depreciate against other currencies. Conversely, if there is a trade surplus, the opposite should apply.

The economic data release is similar for all countries, and the methodology to trading its release applies to all. Look out for data that is out of sync with the general consensus, as this might cause shock waves in terms of market volatility.

Economies do better when they export more than they import, and this is the basic premise to trading this type of data.

Categories
Forex Course

124. Trading The Bullish & Bearish Butterfly Pattern

Introduction

Introduction

Introduction

Bryce Gilmore and Larry Pesavento are the ones to first discovered the Butterfly pattern. It is a harmonic reversal pattern, and it is composed of four legs. The trading of this pattern is similar to the trading of Gartley and Bat patterns that we have learned in previous lessons. The Butterfly pattern helps us in identifying the end of the current move so that we can take the trade. There are both bullish and bearish Butterfly patterns, and we must be going long if we find a bullish butterfly and vice-versa.

Four legs of the Butterfly Pattern

XA – In its bearish version, the first leg of the pattern forms when the price action drops from the point X to A.

AB – The AB leg reverses its direction and retraces to 78.6% Fib level of the distance covered by XA.

BC – In the BC leg, the price action changes its direction and moves back down. It then retraces between 38.2% and 88.6% Fib levels of the distance covered by AB.

CD – This is the final leg of the pattern, and if this leg goes wrong, we can consider the pattern formed till now as invalid. The CD leg must reach between 127% and 161.8% Fib extension of the AB leg. Take the sell trade at point D.

How To Trade The Butterfly Pattern?

Bullish Butterfly Pattern

We have identified the formation of the Butterfly pattern in the USD/JPY Forex pair. The first push ‘XA’ was a random leg on the price chart. The second leg is a countertrend move, and it retraces to the 78.6% Fib level of the XA leg. For the third leg, price action goes up, and the BC leg reaches 88.6% of the AB move. Finally, the CD leg enabled the price to the 161.8% level of BC move.

Since all the legs are formed according to the instructions, we can consider this a Bullish butterfly pattern. When price action completed the last leg, we activated our buy trade in this pair. The stops are placed below the trade, and the take profit was placed at point A.

Bearish Butterfly Pattern

The chart below represents the formation of a bearish butterfly in a downtrend. The first XA bearish leg was any random move in the market. The AB leg goes countertrend, and it retraces 78.6% of the XA leg. The BC move was bearish again, and it retraces to 38.2% of the AB move. Now that the three legs are completed, all we need is to confirm the last leg to ho short in this pair. For printing the last leg, price action again goes back up, and it reached the 161.8% of the BC move.

After all these legs, price action prints a bearish butterfly pattern, and the trade activation was at point D. The first take-profit was at point C, and the second take profit was at point A. We have placed the stop-loss order below the point D. The reason for shallow stops is that if the price goes above point D, the pattern itself becomes invalid.

Conclusion

Placing stop-loss and take-profit order is subjective. If you are an aggressive trader, place your take-profit at point C and for conservative targets place the take profit at point A. For your information, trading the Butterfly is almost as same as trading the Bat pattern. The only difference is the final CD leg. It makes a 127% Fib extension of the initial XA leg in this pattern, rather than the retracement of it. Cheers!
[wp_quiz id=”77249″]
Categories
Forex Assets

Analyzing The ‘XAU/USD’ Financial Instrument & Determining The Trading Costs Involved

Introduction

Introduction

Introduction

Gold is a precious metal and one of the most valuable assets in the market. It is considered to be a safe haven instrument and a popular asset class for hedging positions during market uncertainty. XAU/USD is the abbreviation for the pair Gold Spot against the US Dollar. XAU is the ticker for Gold Spot. It can be traded against other fiat currencies like EUR and GBP as well.

Understanding XAU/USD

Gold Spot is an asset that is traded in troy ounces (Oz). The XAU/USD market price represents the value of the US Dollar for 1 ounce (Oz) of Gold. It is quoted as 1 XAU per X USD. For example, if the current market price of XAU/USD is 1730.50, it signifies that each ounce of Gold is worth the US $1730.5.

XAU/USD Specification

Spread

Spread is the difference between the bid price and the ask price. The spread usually varies based on the account type used for execution. The approximate spread on the gold spot on ECN account and STP account is as follows:

ECN: 100 | STP: 130

Fee

Typically, brokers do not charge any type of fee. But, on ECN accounts, there is some commission you must pay the broker for opening and closing a position. However, the fee is not significantly high.

Slippage

Due to the high market liquidity and slower broker’s execution speed, slippage occurs. It is the difference between the trader’s demanded price and the price at which the broker executed the trade. Slippage can occur both in favor and against the trader.

Trading Range in XAU/USD

The trading range is a tabular representation of the volatility in the market for several different time frames. It gives the minimum, average, and maximum volatility in the pair for different 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.

XAU/USD Cost as a Percent of the Trading Range

Cost as a percent of the trading range represents variation in the trade cost by considering the market’s time frame and volatility. Mathematically, it is the ratio of the volatility value and the total cost of the trade.

ECN Model Account

Spread = 100 | Slippage = 30 | Trading fee = 20

Total fee = Spread + Slippage + Trading fee

Total fee = 100 + 30 + 20 = 150 (pips)

STP Model Account

Spread = 130 | Slippage = 30 | Trading fee = 0

Total fee = Spread + Slippage + Trading fee

Total fee = 130 + 30 + 0 = 160 (pips)

The Ideal Timeframe to Trade XAU/USD

Gold is one of the oldest asset classes and one of the most reliable instruments as well. It is extensively traded in the market as most forex broker has XAU/USD available for trading. Its volatility and liquidity are no less than major currency pairs.

XAU/USD can be traded like any other foreign exchange pair. It, in fact, correlates with commodity currencies like AUD and NZD. Thus, traders use these two currencies in addition to USD, in order to analyze the pair. The same technical analysis applied to other markets can be used on the gold spot as well. However, the fundamentals do differ a little.

Coming to the costs, it technically remains the same for any time frame you trade. However, it relatively changes based on volatility and time frame. For example, a 1D trader who makes 2000 pips P/L on an average pays the same a 1H trader who makes 500 pips P/L on a trade. This is the reason the percentage values are higher in the 1H time frame than the 1D time frame.

Irrespective of the time frame you trade, you need to make sure that the market’s current volatility is above the average volatility. If you end trading when the volatility is at the minimum values, then you will have to pay the same costs for a trade that could not reach the target in your expected time.

Categories
Forex Fundamental Analysis

What Is ‘Services PMI’? How Important Is It In Assessing A Nation’s Economy?

Introduction

Introduction

Introduction

The Services Purchasing Manager’s Index is an excellent leading or advanced macroeconomic indicator, which is used widely to predict economic expansion or contractions. It has various applications for economists, investors, and traders. This indicator predicts inflation, GDP, and the unemployment rate of an economy. Hence, understanding of Services PMI can be hugely beneficial for a trader’s fundamental analysis. 

What is Services PMI?

The Services Purchasing Manager’s Index, also called the Non-Manufacturing Index (NMI), is a survey of about 400 largest non-manufacturers in the United States of America. The word non-manufacturing here implies that the study is associated with the industries that do not produce physical goods; instead, they provide services. Non-physical goods mean the services provided by the IT and software giants like Microsoft and Google etc. The services PMI has fewer survey questions than the manufacturing PMI as some questions, such as inventories, not being relevant to many service providers.

The Services PMI was born more out of a need to accommodate the changing world due to the technological advancements in the last few decades. For most developed nations like the United States, the Service sector contributes more than the Manufacturing industry due to which it had to be taken into account to predict economic trends more accurately.

Purchasing Managers in a company are the purchasing and supply executives associated with procuring the required goods and services that are necessary for running the company. For example, A software company’s Purchasing Manager would typically be in charge of contacting and getting the best internet service provider for the entire company at the lowest or best prices from the market.

They may also be responsible for tie-ups with fellow software companies to get the required software to run their operations. The purchasing Managers have a decent idea of what a company needs, and during what periods these requirements change.

How is the Services PMI calculated?

The Services PMI hence is a compilation of the survey answers given by the Purchasing Managers of the largest 400 non-manufacturing companies of about 60 sectors in the USA. The questions typically asked in the study are related to month-over-month changes in the Business Activity, New orders, Deliveries, and Inventories with equal weightage, as shown in the table below:

All the four categories, as seen when putting together, form the NMI. These four components are enough to ascertain a growth or contraction in the business activity of that company.

The rating of Services PMI range between 0-100. A score > 50 indicates an expansion of economic activity in the non-manufacturing sector. Likewise, a score < 50 indicates contraction.

How can the Services PMI be Used for Analysis?

The data of ISM NMI Reports on Business goes back to 2008 due to which the levels of confidence in the data set may be lower than that of Manufacturing PMI; nonetheless, it is no less effective in ascertaining economic figures like GDP, inflation and employment, etc.

The Non-Manufacturing sector of the United States makes up 80% of the total GDP, and hence the Services PMI is a significant economic indicator in that regard. The Non-Manufacturing sector primarily drives the macroeconomic numbers like the GDP. Together the NMI and PMI cover more than 90% of the industrial sectors that contribute to GDP; hence Services PMI is a must for fundamental analysis.

The correlation between the ISM NMI Data and real GDP is about 85%, which is pretty good. The main advantage of studying Services PMI is that it is an advanced economic indicator. It predicts the real GDP a year ahead, which is commendable.

Below is a snapshot of Services PMI plotted against the real GDP growth rate historically, and we can see the strong correlation existing between them. This explains the importance of these leading indicators in the fundamental analysis of traders.

Impact on Currency

The impact of Services PMI on the currencies is as same as the impact of Manufacturing PMI. You can find this information here.

Sources of Services PMI Reports

We can monitor the NMI reports on the official website of the ISM official website. We can also go through the NMI of other countries from the IHS Markit official website on a subscription basis.

Impact of the ‘Services PMI’ news release on the price charts

The Flash PMI, like Manufacturing PMI, measures the activity level of purchasing managers but that in the services sector. This report is based on surveys taken by the officials covering 300 business executives in the private sector services companies. Traders keep a close watch on the services PMI data as the decisions of Purchasing managers give early access to data about the company’s overall performance, which in turn acts as an indicator of the economy.

Since the services PMI only gives an insight into the performance of the service sector, it does not directly affect the economy. Therefore, the impact of the data on currency is quite less. But traders, build and liquidate some positions in the market based on the PMI data.

The below image shows the previous and latest Services PMI data of Australia, where we see a decrease in the value of the same for the month of February, and now we will analyze the impact it created on the Australian dollar. A higher reading than forecasted is considered to be bullish for the currency while a reading lower than what is forecasted must be considered negative.

AUD/JPY | Before the announcement:

We begin with the AUD/JPY currency pair, where, in the above image, we see that pair is an uptrend before the news announcement. The volatility is high, and the price is making a new ‘higher high.’ As the impact of the PMI data is less, positive data should take the currency higher, and negative PMI data might result in a short-term downtrend. It is preferable to trade the above pair if we come to encounter the second situation as it could essentially result in a retracement of the uptrend, which can be used to join the trend.

AUD/JPY | After the announcement:

After the PMI data is released, owing to a decrease in the PMI number and this immediately is followed by some buying pressure. This is where we can understand the impact of the indicator on a currency where initially due to poor PMI data, the price falls, but it could not even go below the moving average. Thus, one can take this opportunity to join the major trend by trading the retracement, which was brought in due to the bad news. Since the uptrend is strong, one can hold on their trades as long as the market shows signs of reversal.

EUR/AUD | Before the announcement:

EUR/AUD | After the announcement:

The above images represent the EUR/AUD currency pair, and the reason why the chart is going down is that the Australian dollar is on the right-hand side. The chart characteristics almost appear to be the same as in the above pair, but the volatility on the downside is more violent and strong, indicating more strength in the Australian dollar. The only way to trade the pair is the market pulls back and gives us an opportunity to enter, which is the typical way of trading a trend.

After the news release, volatility expands on the upside due to weak PMI data, and the market moves higher. This change in volatility can be used as an opportunity to enter for a ‘sell’ expecting a continuation of the downtrend. This is how the impact of the news can be used to our advantage.

AUD/HKD | Before the announcement:

AUD/HKD | After the announcement:

The next currency pair we will be discussing is the AUD/HKD, and since the Australian dollar is on the left-hand side, the market should move up if the currency gets strong. But here the market is more range-bound, and there is no clear trend. Before the news announcement, price is exactly at the ‘resistance’ area, and soon after the outcome, the price could either try to break out or fall from the ‘resistance.’

After the news announcement, we see that volatility increases on the downside, and later it slows down. This low impact could be signing that traders may not sell at the ‘resistance,’ and thus, it can breakout. If you are an aggressive trader, consider going ‘long’ in the market with a tight stop loss below the recent ‘low.’

That’s about ‘Services PMI’ and the relative impact of its news release on the Forex market. Good luck!

Categories
Forex Market Analysis

Daily F.X. Analysis, June 15 – Top Trade Setups In Forex – Stronger Dollar In Play! 

 On Monday, 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.

 On Monday, 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.

 On Monday, 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.

Economic Events to Watch Today

 

  

EUR/USD – Daily Analysis

The EUR/USD pair closed at 1.12563 after placing a high of 1.13403 and a low of 1.12124. Overall the movement of the EUR/USD pair remained bearish throughout the day. At 11:45 GMT, the French Final CPI for May came in as 0.1% against the expected 0.0% and supported Euro. At 13:00 GMT, the Italian Quarterly Unemployment Rate came in as 8.9% against the expected 8.8% and weighed on Euro. At 14:00 GMT, the Industrial Production in April was declined by 17.1% against the forecasted decline of 19.0% and weighed on Euro.

Poor than expected macroeconomic data from Eurozone weighed on shared currency Euro and dragged the pair EUR/USD to one week’s lowest level near 1.1212. On the other hand, the greenback was stronger on Friday, and the U.S. Dollar Index (DXY) jumped to 97.15 level. The strength of the U.S. dollar also added to the downfall of the EUR/USD currency pair at the ending day of the week.

From the American side, at 17:30 GMT, the Import Prices in May were surged by 1.0%, which were previously forecasted to increase by 0.6% and supported the U.S. dollar. At 19:00 GMT, the Prelim UoM Consumer Sentiment increased to 78.9 from the anticipated 75.0 in June and supported the U.S. dollar. The Prelim UoM Inflation Expectations decreased to 3.0% from previous months’ 3.2% in June and supported the U.S. dollar. After better than expected data from the American side, the pair EUR/USD was further dragged down towards its six day’s lowest level.

Furthermore, the Commissioner President of the European Union, Von der Leyen, will meet the Prime Minister of the United Kingdom, Boris Johnson, on Monday to revive the talks related to the post-Brexit deal. So far, there hasn’t been much progress on a free-trade agreement between U.K. & Brussels while there is not much time left to extend the deadline for a deal till end-2020.

However, on Thursday and Friday this week, the E.U. leaders will meet to discuss the proposed recovery fund to overcome the economic damage caused by the pandemic. All members except the Frugal Four I,e Netherland, Austria, Demark, and Sweden, support the recovery fund. All member’s acceptance is needed for the recovery fund to succeed, and any delay will be a major setback for the shared currency Euro.

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 1.1260 level, having entered into the oversold zone. Today, we can expect bullish correction until 1.1270 and 1.1290 levels, which marks 50% and 61.8% Fibonacci retracement levels. Below these levels, the EUR/USD pair can show selling bias again as the 50 EMA can pressure the pair for selling. On the lower side, support continues to hold around 1.12250 and 1.1208.

GBP/USD – Daily Analysis

The GBP/USD pair was closed at 1.25414 after placing a high of 1.26533 and a low of 1.24735. Overall the movement of GBP/USD pair remained bearish throughout the day. The GBP/USD pair was dropped to its lowest of 8 days on Friday due to mediocre than expected economic data release and U.S. dollar strength. At the ending day of the week, British Pound dropped against the U.S. dollar after the British GDP contracted by a quarter year-on-year in April.

At 11:00 GMT, the Gross Domestic Product (GDP) in April from the United Kingdom was dropped to -20.4% from the expected -18.6% and weighed on GBP. The Manufacturing Production for April also dropped to negative 24.3% from the expectations of -15.0% and weighed on British Pound.

The Industrial Production in April was dropped to -20.3% against the forecasted -15.0% and added in the weight of British Pound. However, at 11:02 GMT, the Goods Trade Balance for April showed a deficit of 7.5B against the forecasted deficit of 11.0B and supported Pound.

At 11:03 GMT, the Construction Output in April was recorder to decline by 40.1% against the forecasted 240% decline and weighed on British Pound. However, the Index of Services was declined by 9.9% against the expected decline of 10.6%.

At 13:30 GMT, the Consumer Inflation Expectations for the United Kingdom were dropped to 2.9% for this quarter from 3.0% of the previous quarter. At 18:08 GMT, the Institute of Economic and Social Research (NIESR) Estimate for GDP in May was -17.6% against the previous months’ -10.3%. At 18:30 GMT, the C.B. Leading Index for April was dropped by 2.9% from the previous month’s 1.2%.

The poor-than-expected macroeconomic data from Great Britain exerted negative pressure on British Pound and dragged the pair to its one week’s lowest level below 1.2500 level.

Apart from negative macroeconomic data, the uncertainty surrounding Brexit also weighed on British Pound on Friday ahead of the PM Boris Johnson’s video conference with European Council President Charles Michel, European Commission President, Ursula von der Leyen and European Parliament President David Sassoli on Monday.

The lack of progress in Brexit talks with Brussels and the calls to review the policy options, including negative interest rates by BoE has also been lagging in the recovery of Pound. Ahead of the BoE meeting, it has already been confirmed on Friday that U.K.’s economy has contracted by 20.4% in April. This means that BoE will likely announce further easing in its policy next week. The current purchase plan of BOE comprises 200 Billion GBP, which is likely to extend further in the next meeting.

Furthermore, the latest round of talks with Brussels failed to deliver any significant progress in the post-Brexit trade deal, which has raised the odds for a no-deal exit from the E.U. As the transition period will expire on January 1, 2021.

On the other hand, from the American Side, the Prelim Consumer Sentiment from the University of Michigan increased in June to 78.9 from the expected 75.0 and supported the U.S. dollar. The U.S. dollar was already strong in the market, and after this release, it exerted even more pressure on the GBP/USD pair.

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

The GBP/USD pair is trading with a bearish bias at a depth of 1.2470, following a downward channel extending resistance around the value of 1.2540. On the 4 hour timeframe, the Cable has entered the oversold zone as we can see the RSI and MACD both were holding below 20 and below 0 levels, respectively. On the lower side, the Cable may find initial support at a level of 1.2385 after the violation of 1.2455 level. On the higher side, the GBP/USD prices may find resistance at 1.2543 area today. Let’s consider sell positions below 1.2450 level. 

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 fell sharply after violating the upward channel, which supported the pair around 107.500. For now, this level is working as resistance for USD/JPY. The 50 periods EMA is also extending strong resistance at 107.650 area while immediate support stays around 106.600. The bearish trend in the USD/JPY pair can trigger a sell-off until the next support level of the 106.017 level today. Let’s wait for the market to test the 107.650 level before entering a sell in the USD/JPY today. 

Good luck! 

Categories
Crypto Market Analysis

Daily Crypto Review, Jun 15 – Bitcoin Under $9,000; What Happens Next?

The crypto market has been relatively stable over the weekend only to drop in the past couple of hours. Bitcoin fell under $9,000, which brought other cryptos’ prices down. Bitcoin is currently trading for $8,962, which represents a decrease of 4.47% on the day. Meanwhile, Ethereum lost 6.13% on the day, while XRP lost 4.34%.

The crypto market has been relatively stable over the weekend only to drop in the past couple of hours. Bitcoin fell under $9,000, which brought other cryptos’ prices down. Bitcoin is currently trading for $8,962, which represents a decrease of 4.47% on the day. Meanwhile, Ethereum lost 6.13% on the day, while XRP lost 4.34%.

The crypto market has been relatively stable over the weekend only to drop in the past couple of hours. Bitcoin fell under $9,000, which brought other cryptos’ prices down. Bitcoin is currently trading for $8,962, which represents a decrease of 4.47% on the day. Meanwhile, Ethereum lost 6.13% on the day, while XRP lost 4.34%.

Flexacoin took the position of today’s biggest daily gainer, with gains of 18.57%. Loopring lost 17.68% 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 65.52%. This value represents a 0.24% difference to the upside when compared to Friday’s value.

The cryptocurrency market capitalization decreased over the course of the weekend, with the market’s current value being $254.27 billion. This value represents a decrease of $10.24 billion when compared to the value it had on Friday.

What happened in the past 24 hours

Bitcoin transaction fee average decreased by 91%

The average fee for Bitcoin transactions has dropped under the $1 mark, meaning it is back to levels previously seen only before the Bitcoin reward halving.

According to data shown by the crypto analytics website BitInfoCharts, Bitcoin transaction fees decreased by 91% from May 20 until June 14. With the fees going down from $6.65 to $0.56, we can certainly see the improvement in the tx fee department of Bitcoin.

_______________________________________________________________________

Technical analysis

_______________________________________________________________________

Bitcoin

The largest cryptocurrency by market capitalization had a slow weekend of consolidation after the 11 June price drop. While many analysts were suggesting a bull run, Bitcoin dropped in price yet again, this time below $9,000. The move reached $8,900 before stabilizing between $9,980 and $9,120 level.


Bitcoin’s volume seems to be following a pattern of decreasing its volume from day to day until a spike happens, which brings its volume up.

Key levels to the upside                    Key levels to the downside

1: $9,120                                           1: $8,980

2: $9,251                                           2: $8,820

3: $9,580                                            3: $8,650

Ethereum

Ethereum has been pretty stable over the weekend and had low volatility as well as volume. Bitcoin’s move towards the downside dragged it down as well, pulling the price down to $217 levels. The $217.6 level held greatly, stopping the bearish move in its tracks.


Ethereum’s volume increased from almost non-existent to almost the levels of the June 11 price drop.

Key levels to the upside                    Key levels to the downside

1: $225.4                                            1: $217.6

2: $240                                              2: $198

3: $251.4                                            3: $193.6

Ripple

XRP spent the weekend performing slightly worse than the aforementioned Ethereum and Bitcoin, slowly losing value as it went towards the $0.19 level. However, the most recent price drop brought its price to $0.182 levels, where it was stopped by the long-term descending trend line.


XRP’s volume increased slightly as the bearish move occurred, while its RSI level entered the oversold territory.

Key levels to the upside                    Key levels to the downside

1: $0.19                                             1: $0.178

2: $0.2 

3: $0.205                                          

 

Categories
Forex Options

FX Options Market Combined Volume Expiries for 15th 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 15 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

– EUR/USD: EUR amounts

  • 1.1260 1.5bn
  • 1.1300 648m

EURUSD pair price action was capped around the 1.1400 key level and is currently in a bear trend lower and likely to find a price squeeze/consolidation before an eventual break to the next trend. The pair is oversold on the one hour chart with the 1.1260 maturity close to current price action.

– USD/JPY: USD amounts         

  • 107.00 405m
  • 107.15 878m
  • 108.00 644m

USDJPY pair is approaching overbought on our one hour chart and the two large strikes at 107.00 and 107.15 are likely to contain price action due to a lack of economic data on the calendar today.

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

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

The Trend in a Bigger Frame is Traders’ True Friend

There is a saying in financial trading “Trend is traders’ friend.” Without any doubt, this is true. In a chart combination trading, a bigger timeframe’s trend plays an important role and helps traders a lot to go with an entry in its counterpart. Let us have a look through an example of how it works.

There is a saying in financial trading “Trend is traders’ friend.” Without any doubt, this is true. In a chart combination trading, a bigger timeframe’s trend plays an important role and helps traders a lot to go with an entry in its counterpart. Let us have a look through an example of how it works.

There is a saying in financial trading “Trend is traders’ friend.” Without any doubt, this is true. In a chart combination trading, a bigger timeframe’s trend plays an important role and helps traders a lot to go with an entry in its counterpart. Let us have a look through an example of how it works.

This is a daily chart. The chart shows that the price heads towards the North at a moderate pace. The last candle comes out as a bullish candle closing well above consolidation resistance. It means the daily traders may start eyeing to go long in the pair.  The daily-H4 combination traders may flip over to the H4 chart for the price to consolidate and produce a long signal.

This is the flipped H4 chart. The chart shows that the last candle comes out as a bullish candle with an upper shadow. The buyers are to wait for the price to consolidate now.

The price consolidates and produces a bullish candle breaching consolidation resistance. Here is a thing. The consolidation range is shallow. The consolidation range plays a significant role in determining the next move’s length. The length of consolidation here does not suggest that the next move will be a big one. The daily-H4 combination traders may trigger a long entry by setting stop loss below consolidation support and by setting take profit with 1R. Let us proceed to the next chart.

The price hits the target of 1R by the next candle. Concentrate on the last candle. The candle comes out as a bullish Marubozu candle. It suggests that the price may head towards the North further. Let us find out how far it goes.

The price heads towards the North with three more candles. This means it travels almost three times more length than the combination traders have anticipated. Can you guess what may be the reason for this?

The daily chart is in a strong bullish trend. The last daily candle breaches through consolidation resistance and makes a strong statement about its bullishness. That may have attracted the daily buyers to go long in the pair as well. This brings extra liquidity and helps the price head towards the North with extreme pressure. This happens most of the time in combination trading. If the bigger chart makes a breakout and has a solid trend, the price seems to head towards the trend’s direction at a good pace in the minor chart. The combination traders may keep this in their mind and make full use of this.

Categories
Forex Daily Topic Forex Fundamental Analysis

The Importance Of ‘Steel Production’ & Its Impact On The Forex Market

Introduction

Introduction

Introduction

Steel is a commodity of paramount importance in today’s international economy. Steel is a staple for the modern economy, and its wide range of usage from the tiniest needles to the largest bridges and tallest buildings makes it an essential commodity for economic prosperity.

Steel is no less critical than Food and Energy for today’s modern world. The far-reaching utility and demand thereof of Steel makes it a good economic indicator for us to understand its impact on exporting and importing economies.

What is Steel Production?

Iron and alloying elements like carbon, chromium, manganese, nickel, and vanadium are added to produce different types of Steel.  Steel industry began in the late 1850s before which it was an expensive commodity that was exclusively used for armors and cutleries primarily.

After the invention of the Bessemer and open-hearth process, Steel Production became easier. By the 1860-70s, the steel industry started to grow rapidly and continues to do so even today. Steel is the most sought after commodity for its durability and strength. It is used for building heavy machinery in the world, like in cars and engines. The natural abundance of Iron and Carbon makes it an affordable commodity for large scale production and supply.

Today Steel is mainly produced through techniques called basic oxygen steelmaking and Direct Reduced Iron (DRI) in an electric arc furnace. Steel’s unique magnetic properties make it an accessible material to recover from the waste for recycling. Steel retains its properties even after undergoing many recycling processes. Hence, it is reusable and economical.

How can the Steel Production numbers be used for analysis?

On a standalone basis, the steel industry directly contributes about 3.8% to the total global GDP as per 2017 research. The indirect impacts meaning the industries that depend on steel production, contribute 10.7% to the global GDP.

The importance of Steel Production apart from its utility is that the supply chain of Steel is very long. The number of dependent industries way more than any other industry. As per 2017’s research by Oxford Economics for every two jobs added in the steel sector, 13 additional jobs are supported through its worldwide supply chain. About 40 million people work in this supply chain of Steel. Indirectly it supported 259 million jobs worldwide and was worth 8.2 trillion dollars in 2017.

Steel is a critical input in the work of many other industrial sectors that produce items essential for the economy to function like hand tools, complex factory machines, Lorries, trains, railway tracks, and aircraft. It is apart from the countless items from day-to-day life like cutlery, tables, cars, bikes, etc. Hence, the economic activity goes beyond the steel-producing locations to multiple sectors across countries. Some of the primary industries that use Steel are Construction, Electronic, Transportation, Automotive, Mechanical Equipment, Energy Production and Distribution, Food and Water, Tools, and Machinery industries.

As the demand for Steel continues to rise, the exporting countries would be at a more significant advantage in terms of economic growth, as evident by below ongoing historical trend.

(Source – worldsteel.org)

Below are the rankings of major economies ranked in terms of exports and imports

(Source – worldsteel.org)

Hence, countries that are net exporters of Steel would be at a higher economic advantage in terms of its own consumption needs and revenue generation through exports. As economies continue to improve the standard of living of their population, the demand for Steel will continue to increase.

Developing economies like China and India have tapped into this market and increased their Steel production over the last decade to achieve export-led-growth. As evident from the above statistics, the developed economies like the United States and the European Union continue to be a net importer while developing economies China and Japan are the leading exporters of the same.

Significant changes in the Steel Production figures will, therefore, have adverse effects on the exporting and importing economy. Hence, Steel Production directly influences economic performance and, therefore, the currency value of that economy.

Impact on Currency 

Steel production is a proportional indicator. An increase in production is beneficial for the economy and thereby for the currency. Steel is a global commodity produced worldwide. Hence, Steel Production figures are useful in identifying the long term megatrends and newly developing Steel industries that will have long term impact.

The short-term fluctuations within the Steel Industry itself would be recorded through other more extensive indicators like Industrial Production (IP) Index in the United States. It is a low impact indicator and is more useful for making long-term sector-wise investment strategies.

Economic Reports

The World Steel Association represents about 85% of the total steel producers across the world. It aims to find global solutions to the environmental challenge to identify trends and bring together regional and national steel producers.

It publishes monthly and annual reports on steel production figures comparing economies in terms of exports, imports, contributions to global GDP on its official website. The monthly reports are usually published in the last week of a month for the previous month.

Sources of Steel Production

The WSA monthly press releases are available here. Statistical figures of global economies are available here and here. The worldwide statistical figures are also available here. The economic impact of Steel is also reported by the American Iron and Steel Institute here.

Impact of the ‘Steel Production’ news release on the Forex market

We saw how Steel Production plays a vital role in an economy with both economic and social impact. Steel is one of the essential materials for the construction of buildings and the manufacturing of many other materials. It creates opportunities in the innovation sector and in research & development projects around the world. Given such a wide range of applications, it is apparent that it has a fair amount of impact on the economy and on the currency. An in-depth analysis revealed that in 2017, the steel industry sold 2.5 trillion worth of products and created U.S. $500 billion value. The steel industry also supports and facilitates 96 million jobs globally.

In this article, we will be analyzing the impact of U.K. Steel Production on the British Pound and witness the change in volatility during the official news announcement. The below image shows the latest Steel Production data in the U.K. produced in the month of April. A higher than expected reading is taken to be bullish for the currency. Contrarily, a lower than expected reading is considered to be negative.

GBP/USD | Before the announcement:

We shall start with the GBP/USD currency pair for examining the impact on the British Pound. In the above price chart, it is clear that the overall trend of the market is down, but recently the price has pulled back quite deep. This is an indication that the downtrend may be coming to an end, and this could turn into a reversal. We will take a suitable position in the market based on the news release.

GBP/USD | After the announcement:

After the news announcement, volatility increases on the downside in the beginning, but later, the price reverses and closes in the green. The buyers push the price higher owing to positive Steel Production data, and the price forms a ‘hammer’ candlestick pattern. The Steel Production news release produced moderate volatility in the currency pair and, lastly, strengthened the British Pound. We need to be careful before taking a ‘buy’ trade as the major trend is down, and the impact of this news is not long-lasting.

GBP/AUD | Before the announcement:

GBP/AUD | After the announcement:

The above images represent the GBP/AUD currency pair. Before the news announcement, the market is in a strong downtrend, and recently the price has pulled back is very gradual in nature. The price action suggests that the market might continue its downtrend and so we will be looking to sell the currency pair after noticing some trend continuation patterns.

After the news announcement, the price reacts mildly to the news data where it nor sharply moves higher nor crashes below. The Steel Production has a slightly positive impact on the pair and lately the volatility to the upside. One should not forget that traders do not give much importance to this data, so one cannot expect the market to continue moving higher. As long as we don’t see trend reversal patterns in the market, an uptrend is far away.

GBP/CHF | Before the announcement:

GBP/CHF | After the announcement:

The above images are that of the GBP/CHF currency pair, where we see that the market is in a downtrend, and lately, the price is has retraced to the ‘resistance’ area. With this, the market has also shown some trend continuation patterns indicating that the downtrend will continue at any moment. If the news release does not change the structure of the chart, this can be an ideal chart pattern for taking a ‘short’ trade.

After the news announcement, the price initially falls lower, but buyers immediately take the price higher, and the candle closes with a wick on the bottom. Although the volatility is low after the announcement, the market is moving on both the directions and produces a neutral effect on the currency pair.

That’s about ‘Steel Production’ 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 Course

123. Trading The Bullish & Bearish Bat Pattern

Introduction

Introduction

Introduction

The BAT is a harmonic pattern that appears in both up and downtrend. This pattern occurs when the trend temporarily reverses its direction and before continuing on its original course. As soon as this pattern ends, the markets resume it’s original direction, giving us an opportunity to enter the trade.

The Characteristics of the BAT Pattern

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

A-B – The AB leg retraces back between the 38.2% and 50% Fibonacci levels to the distance covered by XA leg.

B-C  – For BC leg, price changes its direction again and retrace anything between the 38.2% and 88.6% of the distance covered by the AB leg.

C-D – The CD leg is the final and most important part of the pattern. If this leg goes wrong, then the pattern can be considered invalid. We can go long when the CD leg has achieved 88.6% retracement of the XA leg.

Below is how both Bearish and Bullish Harmonic Bat pattern would look like when Fib levels are applied to it.

Trading the Bullish Bat pattern

The below price chart represents the formation of a Bullish BAT pattern on the USD/CHF forex price chart.

The below image represents our entry and exit while trading the Bullish Bat pattern. At first, we can see the price action printing the XA leg on the chart. Followed by that, the counter-trend AB move has retraced to 38.2% Fib level of the XA move. The BC leg followed the trend and retraced back to 88.6% of the AB leg. The last leg was the CD leg, which reached the 88.6% Fib level of the XA move. The trade activation was at point D, and the stop-loss is placed little below the D point. To place the take-profit order, we chose point A, and we can see how that placement is respected.

Trading the Bearish Bat pattern

The image below represents the formation of a bearish bat pattern on the NZD/USD Forex price chart.

The formation of the pattern starts with the first leg at point X, and it ends at point A. The second leg AB was counter-trend, and it retraced back to 38.2% of the XA leg. The BC leg goes down, and even that retraced 38.2% of the AB leg. The last leg was the CD move, and if this leg doesn’t follow the rules, we shouldn’t consider the pattern valid. The CD leg goes up, and it retraces to 88.6% fib level. Hence, we can consider the pattern formed as valid. We have activated the trade at point D, and the stops were placed above point D. We have placed two take-profit orders – the first one was at point C, and the next one was at point A.

Conclusion

Bat is one of the most credible Harmonic patterns in the market. As the pattern ends at point D, our trade immediately resumes and often provides an excellent risk to reward ratio trades. Once you master trading the bullish pattern, the bearish one can easily be traded. The Bat is also considered one of the most reliable harmonic patterns; So whenever you identify this pattern, it is advisable to go big. Cheers!

[wp_quiz id=”77106″]
Categories
Forex Videos

Fundamental Analysis For Novices! Redbook Index!

https://youtu.be/CNdb6tgG1ak

https://youtu.be/CNdb6tgG1ak

Fundamental Analysis For Novices: Redbook Index

Welcome to the educational video for novices on fundamental analysis. In this video, we will be looking at the Redbook index.
So what is the Redbook index, and how can it help you trading forex?


Successful traders keep a close eye on their economic calendar. They review it at least once a day. This is a typical calendar which is provided by most brokers.


The information that you are looking for is the type of economic event, the time of its scheduled release, which is usually subject to an embargo, and the impact that it is likely to have upon its release. You will also be able to look at the previous weekly, monthly, quarterly or annual release of this data if applicable, and you will be able to study the consensus value which will have been put together by economists and analysts and whereby this is the figure which is generally expected by the market upon its release.


Here we can see that on Tuesday the 9th of June at 13:55 BST, the red book index year on year and month on month is scheduled for release.
The Johnson’s Redbook index is a sales-weighted proprietary indicator as released by Redbook research incorporated in the United States since 1964. This indicator only applies to the US, where it represents the weekly, monthly, quarterly, and annual sales activity of 9000 stores. The data is released every Tuesday at the same time to its subscribers via a conference call or an email prior to its public release. The data forms 80% of the total data as collated in this sector and is officially released into the market by the US Department of Commerce.
Although it is a private indicator, it is closely watched by traders on Wall Street, including the Forex community, because it identifies trends in the short to medium term relating to the retail sector.

The stock market finds this information useful because it ranks retailers across categories including apparel, books, toys and hobbies, department stores, discount stores, footwear, furniture, drug stores, home Improvements, home furnishers, electronics, jewelry, and sporting goods and miscellaneous.
But all traders recognize that it provides an advance warning of changes in consumer spending that, in turn, affect the business growth in this sector and shows warning signs of inflation fluctuations and interest rates.


So, how to trade the Redbook Index?
Information is provided on a percentage basis, and we can see that the previous figures for year on year and month on month were minus figures, and this is related to the coronavirus epidemic. If the actual numbers are released and as percentage terms are worse than the previous numbers shown here, this would be considered to be bad for the US economy, and therefore bad or bearish for the US Dollar. Conversely, should the numbers come in higher than the previous numbers, this would show a pickup in retail sales and a continuing overall trend in the upturn of the US economy, which is filtering through at the moment, and therefore this would be good or bullish for the US dollar.

Categories
Forex Fundamental Analysis

How Does The ‘Private Sector Credit’ Data Impacts The Foreign Exchange Market?

Introduction

Introduction

Introduction

Changes in Private Sector Credit and the nominal values can be used to assess the recent economic stability and oncoming trend. It is an indicator of economic health and can be used as a broad metric to know the overall economy’s liquidity and rate of economic growth. Hence, Private Sector Credit can be utilized as an economic indicator for our fundamental analysis to double-check our current assessments and forecasts.

What is the Private Sector Credit?

As the name suggests, Private Sector Credit refers to the financial resources provided to the Private Industry in the form of loans, securities, or other forms of capital by the financial institutions like Commercial banks, finance companies, or other financial institutions, etc.

How can the Private Sector Credit numbers be used for analysis?

Private Sector Credit is affected by the following factors:

Interest Rates – Higher interest rates from financial institutions can discourage private business firms from taking credit. As the credit becomes “expensive,” it drives out the small businesses’ chances of obtaining credit. Only the top-tier institutions may be able to borrow the credit. The Interest Rates that are prevalent in the market is influenced by the Central Bank’s interest rates. In the United States, it is called the Fed Funds Rate. Hence, Central Authorities also play a key role in loan affordability for the private sector.

A loose monetary policy, where Central Banks inject money into the market through open market operations (purchasing bonds, securities), increases the liquidity of the banking sector, which slowly passes on to other sectors of the economy. It decreases the overall Bank Lending Rates and encourages people and businesses to avail credit. It is generally called a dovish approach.

In a tight monetary policy, Central Banks withdraw money from the economy by selling bonds, securities to decrease liquidity. It results in Banks increasing their short-term interest rates. It encourages people to deposit and save more than borrow and spend. It is generally called a hawkish approach.

Credit Rating – Every individual and corporation has a credit rating that tells the worthiness of the candidate for credit. It measures the risk associated with defaulting on the credit. A high credit rating indicates the risk of default is very less, and banks would be willing to lend more, and even in some cases, at a lower rate. A bad credit rating, in most cases, prevents banks from lending, while some institutions may prefer to lend less, or at a higher interest rate than the market rate for the risk associated.

The Credit Rating is backward-looking; it looks at the candidate’s credit history. The good performance of the business is possible in a healthy economy and vice-versa. Hence, past economic health also influences current credit scores. Economic health, business performance, and credit ratings are interlinked, in a feedback loop, one affects the other.

Property Prices – Since Credits are mostly backed by collateral in the form of assets like real estate, or houses, an increase in the property prices creates a wealth effect. It gives a positive sentiment for the financial institutions to lend resources to the private sector, be it consumers or business firms.

Government Backing – When businesses are backed by Government support, lending is also easy. It is more observable in developing economies, where Governments actively support private businesses to boost employment rates, wage growth, and overall economic growth. The government in developing economies may assist in land acquisition for business set up or disburse loans at cheaper rates to the corporate firms.

Increase in Private Sector Credit indicates the financial institutions are confident about the past and current economic conditions and predict that the economic stability shall continue for the near future, at least. When the confidence of financial institutions is deteriorated by inflation fluctuations, unstable markets, banks increase deposit rate interests, to promote saving, thereby increasing their liquidity, and refrain from lending to a significant extent.

Tight lending environments are symptoms of a weak economic growth rate. An increase in the real GDP growth rate has been observed to be followed by increased Private Sector Credit. In turn, this increased credit helps businesses to increase employee staff, improve productivity. It overall increases economic activity and further assists in the GDP growth rate. Hence, both feed-off each other. Slowdowns also feed-off each other, and it accelerates the stagnation or economic downturn. In such cases, the Government or Central Bank intervention is crucial to keep the economy going.

Impact on Currency

In the context of currency markets, Private Sector Credit figures would be a backward-looking indicator (lagging or coincident indicator) as credit is issued if past business performance and current economic conditions are favorable. Hence, Private Sector Credit is a coincident indicator reflective of the current economic conditions.

The Private Sector Credit is not market sensitive, changes in the figures build up over time, and hence, it is a low impact indicator for predicting short-term currency moves within a 1-2 month time horizon. It is useful for assessing a long-term economic trend, though.

Economic Reports

The World Bank maintains the Domestic Credit to Private Sectors in the form of an online database on its official website. Statistics are added once individual countries’ statistics are reported.

For the United States, a weekly report of the Assets and Liabilities of Commercial Banks in the United States is released by the Federal Reserve, from which we can derive the Private Sector Credit information. The report is released every Friday at 4:15 PM.

Sources of Private Sector Credit

For the United States, Private Sector Credit data is maintained by the St. Louis FRED, and that information can be found here. World Bank Private Sector data is available here.

We can find Private Sector Credit statistics for many countries in nominal terms and as percentages of GDP here.

Impact of the ‘Private Sector Credit’ news release on the price charts

Now that we have a clear understanding of the Private Sector Credit economic indicator, we will now watch the impact of the news announcement on various currency pairs and analyze the data. Private loans measure the change in the total value of new loans issued to consumers and businesses in the private sector. To an extent, the allowances will determine the growth of the private sector.

Thus, the higher the government and banks lend to companies, the greater will be the development. The investor considers this data to be an important parameter when making large investment decisions in a currency or in the stock market. However, when it comes to short term movement of the currency, traders don’t pay a lot of attention to the data.

In today’s example, we will be analyzing the Private Sector Credit in the Eurozone and examine the change in volatility in major Euro pairs due to the announcement. A higher than expected reading should be positive for the currency while a lower than expected reading should be negative for the currency.

EUR/USD | Before the announcement:

We shall begin with the EUR/USD currency pair and examine the impact on this pair. In the above image, we see that the pair is in an uptrend, and just before the news announcement, the price has is at its highest point. Depending on the reaction of the market to the Private Sector Credit news, we will be able to take a position in the market.

EUR/USD | After the announcement:

After the news announcement, we witness a lukewarm reaction from the market, and there is hardly any change in volatility. This is because the Private Sector Credit was nearly the same as before with an increase in a mere 0.1%. This cannot be considered as a major boost to the private sector as the government and banks did not increase lending of loans by a vast percentage. As the impact was least, one can trade the pair on the ‘long’ side by joining the uptrend.

EUR/AUD | Before the announcement:

EUR/AUD | After the announcement:

The above images represent the EUR/NZD currency pair, where we see that before the news announcement, the market has displayed reversal patterns, and there is a possibility that the market might turn into a downtrend. If the news announcement does not increase the volatility to the upside and price does not cross above the moving average, one can some ‘short’ positions expecting a further downward move.

After the news announcement, the price moves higher by a tad bit, and the ‘news candle’ displays little volatility. As the price remains below the moving average and impact was not great, one can take a risk-free ‘short’ trade in the market with a stop-loss above the recent ‘high.’

EUR/CHF | Before the announcement:

EUR/CHF | After the announcement:

Finally, we will discuss the impact on the EUR/CHF currency pair. Here, we see that the overall trend of the market is up and recently the price has started moving in a ‘range.’ Before the news announcement, the price is at the bottom of the range, and thus a buying pressure can come back into the market at any moment. As the impact of Private Sector Credit is less, aggressive traders can ‘long’ position in the market as the price is at the lower end of the range.

After the news release, volatility expands on the upside, and the price closes with a huge amount of bullishness. The Private Sector Credit data proved to be very positive for this pair, which resulted in a sharp rise in the price to the higher side. After the close of ‘news candle,’ traders can go ‘long’ with stop loss below the support and a ‘take-profit’ at the resistance of the range. We cannot have a much higher ‘take-profit’ as the impact will not last long.

That’s about ‘Private Sector Credit’ 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 Assets

Trading The ‘LINK/USD’ Crypto Fiat Pair & Analyzing The Costs Involved

Introduction

Introduction

Introduction

Chainlink is a decentralized oracle network whose purpose is to connect smart contracts with the real world. LINK is its native digital currency, which is used to node operators on the Chainlink decentralized oracle network. LINK has a market capitalization of $1.5 billion and stands 14th on CoinMarketCap. LINK can be bought using fiat currency as well as traded against other cryptocurrencies like BTC and ETH.

Understanding LINK/USD

The price of LINK/USD depicts the value of the US Dollar equivalent to one Chainlink. It is quoted as 1 LINK per X USD. For example, if the market price of LINK/USD is 4.36166, then each LINK will be worth so many dollars.

LINK/USD specifications

Spread

Spread is nothing but the arithmetic difference between the buying and selling price of the cryptocurrency. Unlike forex brokers, these prices are decided by the traders and not the exchange. Hence, the spread constantly varies in exchange as well as across exchanges.

Fee

Typically, there are three types of the fee charged by exchanges including

  • Execution fee (Taker or Maker) – twice, for opening and closing the trade
  • 30-day trading volume fee
  • Margin opening fee, if applicable

Example

  • Long 1,000 LINK/USD at $4.45509
  • 30-day volume fee is $0
  • Order is executed as Taker
  • With Leverage

Total cost of the order = 1,000 x $4.45509 = $4455.09

Assuming the taker fee to be 0.26%, the opening fee will be – $4455.09 x 0.26% = $11.58

The margin opening fee of 0.02% is charged for opening the position using leverage – $4455.09 x 0.02% = $0.89

If the order is closed at $4.50000, the total cost of closing will be – 1,000 x $4.50000 = $4500.00. And the fee for closing will turn to be – $4500.00 x 0.26% = $11.70

Thus, the total fee will be the sum of all the fees – $11.58 + $0.89 + $11.70 = $24.17

Trading Range in LINK/USD

Chainlink is traded in cryptocurrency exchanges and not forex brokers. So, there is no concept of pip and pip value. Instead, the value of the crypto is directly taken into account.

A trading range is the tabular representation of the approximate value movement of the pair, which is obtained through the Average True Range (ATR) indicator. In layman terms, the numbers in the table depict the amount of US dollars a trader will gain or lose in a given time frame. The following table shows the value of the price movement for 1,000 quantities LINK/USD.

Note: the above values are for trading 1,000 units of LINK/USD. If X units of the pair are traded, then the ATR values will be,

(ATR value from the table / 1,000) x X units

Procedure to assess ATR values

  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 an extensive 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.

LINK/USD Cost as a Percent of the Trading Range

Below are two tables representing cost variations for different time frames in terms of a percentage for taker execution and maker execution.

Taker Execution Model

Opening = $11.58 | Margin fee = $0.89 | Closing = $11.70 | 30-day volume = $0

Total fee = Opening + Margin fee + Closing + 30-day volume = $11.58 + $0.89 + $11.70 + $0 = $24.17

Maker Execution Model

Opening = $7.12 | Margin fee = $0.89 | Closing = $7.2 | 30-day volume = $0

Total fee = Opening + Margin fee + Closing + 30-day volume = $7.12 + $0.89 + $7.2 + $0 = $15.21

*Assuming maker fee to be 0.16% the trade value.

Interpretation of Cost as a Percent of the Trading Range

Let us directly understand the table with an example.

1H time frame

ATR value = 41.92

Cost percentage = 57.66%

4H time frame

ATR value = 92.32

Cost percentage = 26.18%

Comparing ATR values, we infer that more profit can be generated in the 4H time frame ($92.32) than in the 1H time frame ($41.92). But, a critical point to note is that the cost is the same for both the trades. A fee that is paid to gain $92.32, the equal fee must be paid to gain $41.92. This difference is represented using the cost percentage. Thus, the percentage in the 1H time frame is higher than that in the 4H time frame, indicating that the relative costs are higher.

Trading the LINK/USD

LINK can be traded against USD and few cryptocurrencies as well. However, LINK/USD is seen to have the highest trading volume. Comparing the liquidity with other cryptocurrency pairs like BTC/USD, ETH/USD, and XRP/USD, LINK/USD is less liquid.

From the above comprehension of the cost percentage, we understood that the costs remain the same irrespective of the time frame you trade. Thus, to relatively reduce the costs, we must focus on the columns of the table. The effective way to trade this pair is to enter the market when the volatility is at or above the average values. For example, if you are a day trader who trades the 1H time frame, you must make sure that the volatility is above the average level. In doing so, you will be able to extract more from the market for the same total fee. Cheers!

Categories
Forex Daily Topic Forex Videos

Fundamental Analysis For Novices! Housing Starts!

https://youtu.be/tlt1waCJvqQ

https://youtu.be/tlt1waCJvqQ

Fundamental Analysis For Novices Housing Starts

 

Welcome to the Fundamental analysis video for novices. In this session, we will be looking at housing starts.

So, what are housing starts?

If you are reviewing your Economic Calendar and you come across the term Housing Starts, it refers to this key economic indicator, which is released around the 17th of each month by the US commerce department. The information is subject to an Embargo, and when released, it refers to the number of new residential homes that had begun construction during the month in question. Only housing starts where construction has begun on the foundations of the property are included in the data.

In the United States, housing starts comprise of three sectors of residential homes, which include single-family homes, town homes and condominiums, and multi-family dwellings with more than five units such as apartment blocks.
Analysts and traders compare the monthly data to previous months figures, in order to ascertain if the month or month and annual housing starts are growing in numbers or falling.

So why is Housing Starts so important in fundamental analysis, and why is it considered a key economic indicator?
Housing starts help to give a clear picture of the economic health of a country because when houses are being constructed, it usually means that people are moving home, buying homes or investing in properties such as buy to let or with a long term view to buy, hold, and sell. These types of home buyers are speculators. Sometimes this area of activity is referred to as flipping, especially in the renovation sector.
The important thing is that this activity usually grows in a growing economy and will typically contract during periods of recession.

The 2008 financial crash which started in the United States was due to the subprime mortgage sector failure, where bundles of mortgages were bought and sold in the financial markets, and where many mortgages were packaged as been A-rated but were in fact blended with mortgages that were considered as high risk due to the fact that the mortgages were large in size and those taking on the mortgages could not necessarily afford them.

When the 2008 recession started, and people were unable to pay their mortgages, the knock-on effect was, banks losing money in failed mortgages, which started a knock-on effect and caused the crash. Housing starts can be affected by the weather, and this is generally factored in by economists when the data is released. They will also consider the business sector surrounding this industry, which include banks, mortgage suppliers, mortgage brokers, builders, construction workforce, and suppliers of goods and materials.

How to trade housing starts?
Because of the coronavirus pandemic, which has caused a contraction in the housing market, traders and analysts and economic commentators will be keeping a close eye on Housing, starts data over the next few months. They will use this data to try and ascertain if the crisis is over and that things are gradually getting back to normal with an uptake in house buying.

When the number is released, which usually happens on the closest business day to the 17th of each month, for the US housing starts data, keep a close eye out for the number, if it is as the market expected, we should not see too much volatility in the markets. If the number is much lower than that which is expected this would be bearish and you might see the dollar exchange rate fall in value against his counterparts, and if the number is higher than expected, this should be considered bullish because it is good for the economy and you might, therefore, see dollar exchange rates move higher.

Categories
Forex Fundamental Analysis

Significance Of ‘Wage Growth’ As A Forex Fundamental Driver

Introduction

Introduction

Introduction

Wage Growth is an essential fundamental indicator that influences the GDP of a country, where the income of people of the country has a major say in the GDP calculation. So, even if Wage Growth does not directly affect the economy but shows its importance by affecting other economic indicators. In today’s article, we will understand how Wage Growth is measured and how it impacts the value of a currency indirectly.

What is Wage Growth?

Wage Growth is referred to the rise in wages of employees that is inflation-adjusted and is often expressed in percentage. It is a macroeconomic concept that determines the economic growth of a country in the longer-term, as it reflects the purchasing power of people in the economy and the living standards. A high wage growth implies price inflation in the economy, and low wage growth indicates deflation. A low wage growth scenario requires intervention from government agencies such as the Reserve Bank, which will stimulate the economy through changes in the fiscal policy.

One of the important ways of maximizing wage growth is through the re-skilling process and investing in the development of the skills of employees. When skilled workers are involved in the decision-making process, it leads to the growth of business and industry as a whole. Hence, more financial compensation can be given for skilled workers who not only lift wage growth but also stimulate competitiveness in the economy. This leads to higher productivity and, thus, GDP per worker.

Measuring Wage growth

The key drivers of Wage Growth are productivity and inflation expectations. Wage Growth that is relative to the increase in prices of commodities in the economy—also known as real wage growth—reflects labor productivity growth as well. However, there are several other factors in a business cycle that results in wage growth diverging from production growth.

There are two different ways of measuring real wages. One is from the producer perspective, while the other is from the consumer perspective. Producers fix their labor costs by calculating them relative to the price of their outputs. Consumers measure wage growth by comparing their income with the cost of goods and services they purchase. Thus, most countries examine real wage growth by adjusting it with the rate of inflation. In Australia, for example, real wage growth is determined by considering three parameters, including inflation, hourly wages, and the average number of working hours.

Factors affecting Wage Growth Rate

Today, wage payment is a crucial factor in influencing labor and management relations. Workers are worried about the annual rise in their wages as it affects their standard of living and purchasing power. Managements in some companies are not concerned about higher wages to their employees as they feel the cost of production will go up and their profits will decrease. Let us see some other factors that affect wage growth.

Demand and Supply

The labor market operates on the forces of demand and supply. When demand for a particular type of skilled workers is more, and there is less number of people skilled in that job, the wage growth rate will be high.

Government Regulation

In countries where the wages are very low, the government may pass legislation for fixing the minimum wages of workers. This will also ensure a minimum level of living. This is especially the case in underdeveloped countries where the bargaining power of laborers is weak.

Training and Development Cost

Before handing over the projects to employees, it is necessary to train them enough, so they are capable of doing the job with high skill. This process usually takes time and money, which the company has to bear. Hence this has an effect on the annual growth in wages of employees.

The Economic Reports

The Wage Growth Rate Reports are released annually and on a quarterly basis that covers the review of the data from the previous quarter to the current quarter. All the major economies of the world and some developing countries publish this data on a quarterly and yearly basis that money managers use for evaluating various performance metrics.

Analyzing the DATA

The Economic Data of Wage Growth is a major determiner of the GDP of a country and, thus, the economy. The GDP, as we know, is a key measure in determining the strength of a country’s economy and, thereby, the value of the currency. By comparing the year on year wage growth, we can predict the growth of the economy and improvements in the standard of living. One can also compare the Data of two countries and analyze why the country with higher Wage Growth has been able to achieve it. The monetary committee can note down the differences in the policies.

Impact on Currency

There is an indirect relation between Wage Growth and the value of a currency. When we see a growth in the wages of workers, this is said to increase industrial growth and overall productivity, which in turn improve the GDP of the country. Higher levels of GDP will generate a higher demand for the currency and will increase the economic activity of the country. However, when wages are stagnant and do not show any rise, this will decrease consumer spending and leads to lower living standards. Due to this, the GDP will be affected and will drive the currency lower.

Sources of information Wage Growth

Most countries release Wage Growth data on a quarterly and yearly basis, and countries like the United States and Australia provide a detailed analysis of the same. The reports are published by the respective governments on their ‘Treasury’ website, which includes the International comparison of wage growth rates, Trends in wage growth, and more. 

Links to Wage Growth Information Sources   

AUD- https://tradingeconomics.com/australia/wage-growth

CAD- https://tradingeconomics.com/canada/wage-growth

EUR- https://tradingeconomics.com/euro-area/wage-growth

JPY- https://tradingeconomics.com/japan/wage-growth

CHF- https://tradingeconomics.com/switzerland/wage-growth

GBP- https://tradingeconomics.com/united-kingdom/wage-growth

USD- https://tradingeconomics.com/united-states/wage-growth

The growth in demand for goods and services depends on the spending power and the income that flows to the population, a significant portion of which comes from wages. Companies and government need to understand that growth in wages is not just a cost of production but are also a source of spending and thus of revenue and profit for the business.

Impact of the ‘Wage Growth’ news release on the price charts

After understanding the significance of Wage Growth in an economy, we shall extend our discussion and find out the impact of Wage Growth data on currency pairs. From the below image, we can infer that the Wage Growth may not cause a drastic change in volatility of a forex pair as the level of importance assigned to it is very low. Wage Growth numbers are announced on both a monthly and yearly basis, but to estimate the degree of change in volatility, we will be analyzing the year-on-year numbers of the same. A reference currency that we have chosen for this purpose is the Russian Ruble (RUB).            

Below is an image showing the latest, estimated, and previous Wage Growth data of Russia, where we see that there has been a decrease in Wages by 0.4% from the previous year. A higher reading than before is said to be positive for the currency while a lower than before data can negatively impact the currency. The Wage Growth data is officially released by the ‘Russian Federation Federal State,’ which is responsible for maintaining the fundamental information of Russia. Since the impact of the Wage Growth news announcement is least, let us look at the reaction of the market.

USD/RUB | Before the announcement:

We shall first look at the USD/RUB currency pair and analyze the impact of Wage Growth on this pair. In the above chart, we see that the market is a strong downtrend and recently we see a retracement from the lowest point. Since economists have forecasted a much lower wage growth than before, it is not prudent to take ‘long’ positions in the market as, technically speaking, this would mean we are trading against the trend. Therefore, a risk-free approach would be to wait for the news announcement and then trade based on the change in volatility.

USD/RUB | After the announcement:

The above chart shows the market reaction to the Wage Growth news announcement where the data came was beyond expectations and mildly lower than the previous year’s numbers. Since the data was robust, the price goes down, and the Russian Ruble strengthens. As the difference between the forecasted to actual data was huge, the volatility increases a lot on the downside, and the market seems to continue its downtrend. After the clarification of Wage Growth data and confirmation signs from the market, we can enter the market by ‘shorting’ the currency pair with a stop loss above the ‘news candle.’

EUR/RUB | Before the announcement:

EUR/RUB | After the announcement:

The above images represent the EUR/RUB currency pair, which is similar to that of the USD/RUB pair in terms of price behavior. However, the downtrend here is more resilient and stronger than in the above pair. The pullback, too, has been very little, which shows the strength of the Russian Ruble. Therefore, an above-average Wage Growth data should take the currency much lower while below-average data can result in a rally for a small duration of time, but not a trend reversal.

After the news announcement, we see that the price falls and leaves a wick on the bottom. This wick is due to the reaction at the support area, but this shouldn’t scare us, and we can confidently take ‘short’ positions in the market with a compulsory stop loss.

GBP/RUB | Before the announcement:

GBP/RUB | After the announcement:

The above charts are that of the GBP/RUB currency pair, where we see that the characteristics of this pair are totally opposite to that of the above-discussed pairs. Before the news release, we witness a strong uptrend, and the price is currently at a resistance area. We have two options at this point in time, one, to ‘long’ in the market as Wage Growth data is expected to be very bad and second, to wait for the news announcement, and if the numbers are weak, go ‘short’ in the market.

After the release of Wage Growth data, the price initially goes down as the numbers were better than expectations, but later, the candle closes in green. The volatility increases on both sides, but the numbers were not good enough to strengthen the Russian Ruble. Therefore, the only way to trade this pair is to wait for a breakout above the resistance area and then trade the retracement of it -using the Fibonacci tool.

That’s about ‘Wage Growth’ and its impact on the Forex market after its news release. In case of any queries, let us know in the comments below. Good luck!

Categories
Forex Price Action

When the Same Chart Offers a Better Trade Setup

In today’s lesson, we are going to demonstrate an example of an H4 chart offering two entries. The first one does not create enough bullish momentum right after the breakout, but the second one does. Let us now get started.

In today’s lesson, we are going to demonstrate an example of an H4 chart offering two entries. The first one does not create enough bullish momentum right after the breakout, but the second one does. Let us now get started.

In today’s lesson, we are going to demonstrate an example of an H4 chart offering two entries. The first one does not create enough bullish momentum right after the breakout, but the second one does. Let us now get started.

The chart shows that after being bearish for a long while, the chart produces two bullish candles consecutively. The H4 traders may keep their eyes on the daily chart to get a daily bullish reversal. Then, consolidation followed by an H4 bullish reversal candle would be the signal to go long in the pair.

The price starts having a bearish correction. The buyers are to wait for a bullish reversal candle first to go look for a long opportunity. The price is at a significant level, where it reacted earlier several times. The reversal candle might be around the corner.

Yes, the chart produces a bullish Inside bar. It is not a strong bullish reversal candle, but it is a sign that the price may get bullish soon, considering other factors. Let us proceed to the next chart.

The next candle comes out as a bullish candle with a long bullish body having a tiny upper shadow. The buyers may trigger a long entry right after the candle closes by setting stop loss below consolidation support and by setting take profit with 1R.

The next candle comes out as a bearish inside bar. The buyers usually would love to see the price head towards the trend’s direction after triggering entry. It does not happen here. However, it does not look too bad.

What a surprise! The chart offers one more entry. Look at the last candle, which comes out as a bullish engulfing candle closing well above consolidation resistance. Some buyers may trigger another entry. Yes, it is a debatable issue whether traders should take multiple entries in the same pair. At least, if traders miss the first chance, they may consider taking entry here. Let us find out what the price does next.

The price heads towards the North with good bullish momentum. It hits the buyers’ target with ease. On the second occasion, the bullish engulfing candle forming right at consolidation support makes the pair very bullish. On the first occasion, the price does not get that bullish after the signal candle. On any day, the second signal is better than the first one. Some traders do not like taking multiple entries, which is fair enough. If a trader does not mind taking multiple entries, he may as well consider taking entry if it is a better trade setup than the last one with relatively a smaller lot than his usual trading lot.

 

Categories
Forex Daily Topic Forex Education Forex Psychology

Guidelines for Successful Trading

Introduction

Introduction

Introduction

To achieve a successful trading profession is more than a couple of good trades, and a fancy template in the trading platform, nor a social media trader’s fashioned lifestyle.

In this educational article, we’ll present a set of guidelines to aid in building a successful trading plan.

The Right Trading Mindset

Trading in financial markets must be understood as a decision process, which, when developed systematically, tends to provide consistent results.

Robert and Jens Fischer, in their work “Candlesticks, Fibonacci, and Chart Pattern Trading,” define a list of rules or guidelines that can aid investors in its decision-making process. These guidelines are as follows:

Self-knowledge 

If the investor feels uncomfortable when it is in the market, this could be indicative of an incorrect positioning in terms of position size or market side.

Ego by a winning streak

An increasing ego encouraged by a winning streak, especially in the first trades, could drag the investor toward huge losses.

Hopping when things go wrong 

Many traders tend to let run the losses expecting a market reversal to the trade direction, and they usually close a winning trade too soon, with a small profit (fearing a loss), which is a recipe for disaster. To solve this issue, traders must plan every trade in advance,  with a pre.defined stop-loss and profit target before opening any trade.

Losses are part of the business 

Investors must be aware that it is impossible to have 100% of winning trades. 

Avoid Martingale position sizing

The increasing the size of the position when the market and the trade moves against you is the path to bankruptcy.

Trading systems could fail

There is no trading system that could provide 100% of winner trades. However, losses will increase when the investor jumps from one system to another. Each strategy has its advantages and disadvantages. The profitability of any trading system will depend on the market conditions, and the investor must learn to live with the potential risk of his trading system.

Diversify the risk

Independent of the profitability associated with a trading product, the systematic diversification of risk could give the investor a smoother equity curve growth than when considering only a single trading asset.

Making Money by trading is a long road 

The consistent and profitable trading in financial markets is the result of a systematic work taking months or years where results obtained can confirm the rentability of each trading system.

The importance of a trading plan

Successful trading is not to make money quickly; it is related to the capability to make profits consistently long term, independently of changing market conditions.

A comfortable trading strategy

The trading strategy must provide the investor with similar results in real-time than on paper-money or in the back-test mode. If the approach does not offer the same results in real-time, the methodology must be revised.

The importance of discipline

The most important characteristic of successful traders is discipline because they limit their decisions to their established trading methodology.

The Importance of Number Three

In the financial markets, there exist a vast number of ways to analyze it technically, for example, chartist formations, Elliott wave, or candlesticks patterns. However, those ways to analyze the market have in common, and it is number three.

  • In Elliott wave analysis, when the price moves in a trend, this develops three movements in the primary trend’s direction. 
  • The most popular chartist pattern known as Head and Shoulders has three tops (or valleys) and two valleys (or tops.) When the price reaches its third valley, the price action tends to break below the previous two valleys and continue a downward (or upward) sequence.
  • An ascending triangle corresponds to a continuation pattern, in the bullish case, three valleys, and two tops. When the price action touches by the third time the top, the price surpasses the previous two highs and continues its earlier move and continues its primary trend.

In the following figure, we observe a set of patterns that follows the characteristics of “three.”

 

Conclusions

In this educational article, we presented a set of guidelines to develop a trading mindset that can support a profitable trading methodology along time.
We also exposed a group of chart patterns that correspond to a simplification of three moves, which could support the analysis and generation of trading opportunities in the real market.
In the following article, we will present the basic principles of a trading strategy.

Suggested Readings

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

Categories
Forex Assets

Analyzing The ‘XMR/USD’ Crypto Fiat Pair

Introduction

Introduction

Introduction

Monero is a private and secure cryptocurrency that was launched 18th of April 2014 as a fork of ByteCoin. It is an open-source digital currency built on a blockchain, making it opaque. With Monero, the holder will have full control over their investment and funds, and nobody will have access to their balance and transactions.

Monero is traded in exchanges under the ticker XMR. It is under the top 20 in terms of market capitalization according to data from CoinMarketCap. It can be traded against USD as well as for cryptocurrencies Bitcoin, Ethereum, Tether, etc.

Understanding XMR/USD

The price of XMR/USD depicts the value of the US Dollar equivalent to one Monero. It is quoted as 1 XMR per X USD. For example, if the market price of XMR/USD is 64.67, then each XMR will be worth about 65 dollars.

XMR/USD specifications

Spread

Spread is the basic difference between the bid and the ask price of the cryptocurrency. These prices are put up by the clients and not exchange. Thus, the spread constantly varies in and across exchanges.

Fee

The types of fees in cryptocurrency exchanges vary from that of equity broker and forex brokers. Most crypto exchanges charge the following fees:

  • Execution fee (Taker or Maker) – twice, for opening and closing the trade
  • 30-day trading volume fee
  • Margin opening fee, if applicable

Example

  • Short 100 XMR/USD at $64.82
  • 30-day volume fee is $0
  • Order is executed as Taker
  • With Leverage

Total cost of the order = 100 x $64.82 = $6482

Assuming the taker fee to be 0.26%, the opening fee will be – $6482 x 0.26% = $16.85

Since the trade is opened with leverage, there is 0.02% of margin opening fee collected – $6482 x 0.02% = $1.29

If the position is squared off at $60.00, the total cost of closing will be – 100 x $60.00 = $6000.  The fee for the same can be calculated as – $6000 x 0.26% = $15.60

The algebraic sum of all the fee will yield the total fee as –

$16.85 + $1.29 + $15.60 = $33.74

Trading Range in XMR/USD

A trading range is the number of units the cryptocurrency pair moves in a specific time frame, represented in US dollars as the quote currency for the pair is USD. The values basically depict the volatility in different time frames.

The following table is the trading range for 100 quantities of XMR/USD.

Note: the above values are for trading 100 units of XMR/USD. If X units of the pair are traded, then the ATR values will be,

(ATR value from the table / 1,000) x X units

Procedure to assess ATR values

  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.

XMR/USD Cost as a Percent of the Trading Range

This cost as a percent represents relative the fee on the trade by considering the volatility and time frames. The percentage values are calculated by finding the ratio of each ATR value and the total fee.

Taker Execution Model

Opening = $16.85 | Margin fee = $1.29 | Closing = $15.60 | 30-day volume = $0

Total fee = Opening + Margin fee + Closing + 30-day volume = $16.85 + $1.29 + $15.60 = $33.74

Maker Execution Model

Opening = $10.37 | Margin fee = $1.29 | Closing = $9.6 | 30-day volume = $0

Total fee = Opening + Margin fee + Closing + 30-day volume = $10.37 + $1.29 + $9.6 + $0 = $21.26

*Assuming maker fee to be 0.16% the trade value.

Trading the XMR/USD

XMR is ranked 16 in market capitalization with a denominator over a thousand. It offers enough liquidity and volume for retail traders to participate in this pair. However, it is comparatively lesser than coins like Bitcoin, Ethereum, Ripple, Bitcoin Cash, etc.

As far as the analysis for this pair is concerned, it is no different from analyzing other cryptocurrencies and forex pairs. Hence, you can confidently apply those concepts in Monero as well.

The cost percentages in the above tables represent how expensive or cheap trade is going to be based on the profit you make or the loss you incur. The larger the percentage, the higher is the fee. Note that we are referring to the relative fee, not the absolute fee. Irrespective of the time frame and volatility, the fee will be the same but will vary relatively. For example, a short-term trader who makes $50 on trade must pay the same fee as a long-term trader who makes $1000.

Thus, to effectively reduce your relative costs, you must understand the volatility of the market. The concept is simple; one can make money only if there is enough movement in the market. Thus, before taking a trade, you must know the current volatility of the market using the ATR indicator. If the values are above the average, then you’re good to go. But, values near the minimum value indicates that there is not much movement in the market, and it could not reach your target point within the expected time.

Categories
Forex Options

FX Options Market Combined Volume Expiries for 12th 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 12 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

– EUR/USD: EUR amounts

  • 1.1275 540m
  • 1.1310 608m
  • 1.1430 781m

EURUSD consolidating on the one hour chart having been overbought. Two significant sized maturities are in close proximity to the current price action.

– USD/JPY: USD amounts         

  • 107.35 443m
  • 108.00 851m

USDJPY is overbought on the one hour chart. Expect a pullback and continuation to the red maturity. US data will impact on price action during the US session. Further sell-offs on US equities could promote the Yen to safe haven where we might expect the pair to fall lower.

– USD/CAD: USD amounts

  • 1.3500 541m

The USDCAD pair hit the buffers at 1.3665 and is retracing lower. Currently oversold, but the pair could gain some impetus to reach the maturity at the key 1.35 level later today. Watch for US data later which will be released before the 10 AM cut..

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

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 Market Analysis

Daily F.X. Analysis, June 12 – Top Trade Setups In Forex – U.S. Prelim UoM Consumer Sentiment Ahead! 

On the news front, eyes will remain on the UK GDP figures, which are expected to perform worse than the previous month’s data. Alongside the U.S. Prelim UoM Consumer Sentiment figures will be in play to drive price action in gold and dollar related pairs today.

On the news front, eyes will remain on the UK GDP figures, which are expected to perform worse than the previous month’s data. Alongside the U.S. Prelim UoM Consumer Sentiment figures will be in play to drive price action in gold and dollar related pairs today.

On the news front, eyes will remain on the UK GDP figures, which are expected to perform worse than the previous month’s data. Alongside the U.S. Prelim UoM Consumer Sentiment figures will be in play to drive price action in gold and dollar related pairs today.

Economic Events to Watch Today

 

 

EUR/USD – Daily Analysis

The EUR/USD pair was closed at 1.12974 after placing a high of 1.14035 and a low of 1.12886. Overall the movement of the EUR/USD pair remained bearish throughout the day. The EUR/USD pair gained traction in the early session and rose to a daily high of 1.1403 on Thursday. However, the pair EUR/USD lost its traction on the back of the risk-averse market sentiment, which boosted the demand for safe-haven U.S. dollar.

In the early trading session, the EUR/USD pair followed its previous day’s movement and rose above 1.140 level but failed to remain there in the wake of a strong U.S. dollar against Euro. Dollar Index (DXY) stayed relatively calm near 96.00 level in the first half of the day.

After the release of economic data from both sides, the EUR/USD pair started to lose its daily gains and turned the gains into losses.

On the data front, at 10:30 GMT, the French Final Private Payrolls for the quarter came in as -2.5% against the forecasted -2.3%and weighed on Euro. At 13:00 GMT, the Italian Industrial Production in April was dropped by 19.1% against the expected fall of 24.0%.

At 17:30 GMT, the Core PPI from the U.S. for May came as -0.1% the same as expected and PPI as 0.4% against the expectations of 0.1% and supported the U.S. dollar. The jobless claims for the week also dropped to 1.542M against forecasted 1.550M and supported the U.S. dollar.

Furthermore, the Eurogroup meeting was held on Thursday to discuss the distribution of 750 billion euros to member states to deal with the economic shock from the crisis. Five hundred billion euros were planned to disburse as grants and 250 billion as loans.

 Meanwhile, the finance minister of the Eurozone approved the distribution of 748 million to Greece from profits of European Central Bank that purchased Greek sovereign bonds.

Moreover, the 19 finance ministers of the euro area were looking for a new president and at the time when the region was facing tough negotiations over 750 billion euros fiscal plans to help it recover from the coronavirus.

The Eurogroup current president, Mario Centeno, resigned from the Portuguese government served as a finance minister since October 2015. However, the three names for potential candidates are Spain’s finance minister Nadia Calvino, Luxembourg’s finance Chief Pierre Gramegna and from Ireland, Paschal Donohoe.

Daily Support and Resistance

  • R3 1.1522
  • R2 1.1473
  • R1 1.1422

Pivot Point 1.1372

  • S1 1.1321
  • S2 1.1271
  • S3 1.122

EUR/USD– Trading Tip

The EUR/USD pair is trading at 1.1296 level, having entered into the oversold zone. Today, we can expect bullish correction until 1.1309 and 1.1340 levels, which mark 38.2% and 50% Fibonacci retracement levels. Below these levels, the EUR/USD pair can show selling bias again as the 50 EMA can pressure the pair for selling.

GBP/USD – Daily Analysis

The GBP/USD pair was closed at 1.26016 after placing a high of 1.27541 and a low of 1.25863. Overall the movement of GBP/USD pair remained bearish throughout the day. The GBP/USD pair dropped on Thursday after posting gains for ten previous days on the back of strong intraday U.S. dollar buying, which dragged the pair further below towards 1.2500 level.

The risk-off market sentiment emerged after the comments of Federal Reserve on Thursday and the news that some American states were showing some signs of coronavirus cases again.

The Fed Chair Jerome Powell said that the U.S. economy was set to contract by 6.5% this year, and the unemployment rate was expected to reach 9.3%. The U.K. will release its latest GDP growth figures on Friday, which was previously estimated to show a contraction in April by 18%, followed by a 5.8% decline in March.

On Brexit front, the negotiations between the U.K. & E.U. will now intensify with weekly talks throughout July into August and in the hope of a breakthrough. The U.K. is facing a very difficult time from relatively increased COVID-19 cases and negotiations at that time are weighing even more on British Pound. The hopes of any breakthrough for post Brexit deal rely on the talks between UK PM Boris Johnson and E.C. President von der Leyden, which will hold after the E.U. Summit.

Meanwhile, some fresh bearish pressure for GBP/USD came after the Organization for Economic Co-operation and Development warned that U.K.’s economy was set to be the hardest hit amongst the world’s developed countries from coronavirus pandemic.

At the data front, the RICS House Price Balance for May from the U.K. was released at 4:01 GMT, which showed a decline of 32% against the expected decline by 24% and weighed on British Pound and dragged the GBP/USD pair.

From the American side, the Unemployment Claims for last week were reported as 1.542M against the expected 1.550M and supported the U.S. dollar, which ultimately dragged the pair GBP/USD further toward downside on Thursday.

Daily Support and Resistance

  • R3 1.2912
  • R2 1.2863
  • R1 1.2804

Pivot Point 1.2755

  • S1 1.2696
  • S2 1.2647
  • S3 1.2588

GBP/USD– Trading Tip

On Friday, the GBP/USD pair is trading with a bearish bias at 1.2570 level ever since it has violated an upward trendline support level of 1.2650. On the 4 hour timeframe, the Cable has entered the oversold zone as we can see the RSI and MACD both were holding below 20 and below 0 levels, respectively. On the lower side, the Cable may find initial support at a level of 1.2550, and below this, the next support may be found around 1.2503 level today while the bullish breakout of 38.2% Fibonacci resistance level can lead the GBP/USD pair towards 1.2650 level, which marks 61.8% Fibo level today. 

USD/JPY – Daily Analysis

 The USD/JPY was closed at 106.859 after placing a high of 107.232 and a low of 106.569. Overall the movement of the USD/JPY pair remained bearish throughout the day. The USD/JPY currency pair dropped for the 4th consecutive day on Thursday despite strong demand for the U.S. dollar due to the risk-off market sentiment after the Fed’s gloomy outlook on the U.S. economy presented in its latest monetary policy meeting.

The increasing fears of a second wave of coronavirus after the increased number of appearing cases of infected people due to easing of lockdown restrictions added in the risk-off market sentiment and currency pair’s declines on Thursday.

FOMC turned down the odds of negative interest rates and held its rates near zero at 0-0.25% on Wednesday but suggested that the recovery road would be longer for the U.S. economy as the impact of coronavirus crisis was deeper than expectations. Fed said that it would use all its tools to overcome the damage caused by a coronavirus.

The risk-off market sentiment caused the USD/JPY pair to move in a downward direction on Thursday towards the lowest level of 106.569.

On the data front, at 4:50 GMT, the BSI Manufacturing Index dropped by 52.3 against the forecasted decline by 20.5 and weighed on Japanese Yen. At 17:30 GMT, the Core PPI for May came in line with the expectations of -0.1%. The PPI for May increased to 0.4% from the expected 0.1% and supported the U.S. dollar. The Unemployment Claims from last week were reported 1.542M against the expected 1.550M and gave strength to the U.S. dollar. Despite the strength of the U.S. dollar, the USD/JPY pair moved in a downward direction and posted losses for 4th consecutive day on Thursday.

Furthermore, Moderna told Bloomberg on Thursday that the final-stage trial of its vaccine for COVID-19 will start July. Moderna was the first company to start human clinical trials of its vaccine in the U.S.

The last stage of the trial will be completed with the partnership of the U.S. National Institute of Allergy and Infectious Diseases (NIAID). The study will include 30,000 people and will provide definite clinical proof that vaccines actually prevent people from developing COVID-19.

Daily Support and Resistance    

  • R3 108.58
  • R2 108.23
  • R1 107.67

Pivot Point 107.33

  • S1 106.77
  • S2 106.43
  • S3 105.87

USD/JPY – Trading Tips

The USD/JPY pair fell sharply after violating the upward channel, which supported the pair around 107.500. For now, this level is working as resistance for USD/JPY. The 50 periods EMA is also extending strong resistance at 107.650 area while immediate support stays around 106.600. The bearish trend in the USD/JPY pair can trigger a sell-off until the next support level of the 106.017 level today. Let’s wait for the market to test the 107.650 level before entering a sell in the USD/JPY today. 

Good luck! 

Categories
Forex Daily Topic Forex Fundamental Analysis

Importance Of ‘Construction Output’ As An Economic Indicator

Introduction

Introduction

Introduction

Construction activity is the beginning phase of an expected economic growth, which is more vividly evident in the developing economies than developed economies. New infrastructures, buildings, renovations are all part of an expanding economy. Construction is an important economic indicator to assess economic health.

What is Construction Output?

Construction Output is the measure of building and civil engineering work in monetary terms. It is the amount of construction work done measured as the money charged to the customers. It refers to the construction work performed by an enterprise whose principal activity is classified as Construction. Since a measure of the amount of work is proportional to fees charged for the activity, it is measured in the domestic currency of the region where the construction activity was undertaken.

Overall, Construction Output is a measure of the amount charged to customers for construction activity by construction companies in a specific period ( monthly, quarterly, annually). The UK Construction Output is based on a sample survey of 8,000 businesses employing over 100 people or having an annual turn over greater than 60 million sterling pounds. The Construction Output excludes the Value Added Tax (VAT) and payments to subcontractors.

The Construction Output data reporting based on sectors, new or existing renovations, seasonal adjustments, volume, value-based, etc. precisely as illustrated for reference below:

(Picture Credits – Ons.gov)

The Construction Output data is also reported in the index format, where the base index period is 2016, for which the score is 100, and subsequent reports would be scored in comparison to this index period. Typically, it is widely discussed in terms of percentage changes concerning the previous month.

How can the Construction Output numbers be used for analysis?

The Construction Output is a significant economic indicator in the United Kingdom, that is closely watched by both private and public sectors, especially by the Bank of England and HM Treasury. The Construction Output figures assist them in policy reforms and economic-decisions. Growth is a process of emergence of new and better things and discarding old inefficient ones. Construction, in this sense, is just that. Construction involves the erection of new buildings, infrastructures, renovations, expansions of existing infrastructures.

Increased Construction Output implies more people employed, better wages in the construction sector, more demand for raw materials for the Construction, etc. The very act of Construction has a ripple effect on the economy.

Secondly, the Construction of corporate infrastructures or commercial structures implies that these buildings will be used for further economic activities. For example, a company doubling its company size is planning to double its staff and correspondingly the business that it generates. Hence, Construction Output figures improvement is indicative of an improvement in many other sectors.

All these improvements correlated with Construction Output also stimulate consumer confidence and encourages consumer spending, which further stimulates the economy and boosts growth. The importance of Construction Output is also evident from the fact that it is taken into account for the compilation of the GDP monthly estimate.

New Orders in the Construction Industry

It is a quarterly report produced by the administrative data provided by the Barbour ABI. Construction Output data reflects immediate short term health of the economy as it accounts for the construction work that has already taken place. Whereas, the New Orders report from the ONS provides more a forward-looking estimate of the potential construction activity in Great Britain.

New Orders are also crucial in gaining insight into the upcoming economic trends. Hence, it is advisable to use the New Orders report in conjunction with Construction Output report data to assess current and ongoing economic trends more precisely. It is a quarterly report. It is also presented as an index report for which the base index period is 2016, i.e., the New Orders score for 2016 is 100, and all subsequent reports are reported in comparison to this index value.

Impact on Currency

The Construction Output is a coincident indicator in the short-run. Still, it can also be used to gauge upcoming economic trends based on the type of Construction Activities are being undertaken. Also, if we take the New Orders report, both together can act as a leading economic indicator.

Construction Output reflects the current economic conditions by showing the value of the Construction Activity that has already taken place every month.  It is a proportional economic indicator, meaning an increase in Construction Output figures is good for the economy and correspondingly for the currency and vice-versa.

Economic Reports

The Construction Output reports are published approximately six weeks after the reference month by the Office for National Statistics (ONS) on its official website.

Monthly Construction Output reports go back to 2010 for the United Kingdom. A derived data set going back to 1997 can be obtained from monthly GDP data sets. The Construction Output reports are available in seasonally adjusted and unadjusted formats, and at current prices and chained volume measures (excludes effects of inflation).

For the United States, the Bureau of Economic Analysis releases GDP by Industry quarterly and annual estimates, which serves as a close or relatable statistic for the Construction Output of the United Kingdom. As such, there is no Construction Output dedicated nationwide statistics in the United States. Hence, GDP by Sector analysis helps us to analyze the Construction Industry’s performance in the United States.

Sources of Construction Output

We can find the latest Construction Output statistics for the United Kingdom can be found below.

For the United States – Gross Output of Private Industries: Construction

Construction Output reports for various countries are available here.

Impact of the ‘Construction Output’ news release on the price charts

By now, we believe that you have understood the significance of Construction Output in an economy, which essentially includes construction work done by enterprises that are used for measuring the growth of the construction sector. It gives an insight into the supply on the housing and construction market. The Construction industry is one of the first to go into recession when the economy declines but also to recover as conditions improve. The Construction Sector has a marginal influence on the GDP of an economy. Thus, investors do not give a lot of importance to the data when it comes to the fundamental analysis of a currency.

In today’s illustration, we will explore the impact of the Construction Output news announcement on different currency pairs and compare the change in volatility. The below image shows the previous, forecasted, and latest data of the United Kingdom, where we see a reduction in total output in the month of March. Let us look at how the market reacted to this data.

GBP/USD | Before the announcement:

The first pair we will look into is the GBP/USD currency pair, where the above image shows the characteristics of the pair before the news announcement. The market is in a strong uptrend and has started moving in a range with the price at the bottom of the range at the moment. Thus, we can expect buyers to show up any time from this point. As economists are expecting healthier Construction Output data, traders can take a ‘long’ position with a strict stop loss below the ‘support.’

GBP/USD | After the announcement:

After the news announcement, the market drops slightly owing to weak Construction Output data, and the volatility is seen to increase on the downside. But since the impact of this news release is less, the effect will not last long on the currency pair, and we cannot expect the market to break key technical levels. This is why the price reacts strongly from the ‘support’ and bounces off. Traders need to analyze the pair technically and trade accordingly.

GBP/AUD | Before the announcement:

GBP/AUD | After the announcement:

The above images represent the GBP/AUD currency pair, where we see that before the news is announced, the market was in a strong downtrend indicating a great amount of weakness in the British Pound. Currently, we can say that the price in the ‘demand’ area and thus we can expect bullish pressure to come back in the market at any moment. It is not recommended to buy the currency pair as the downtrend is dominant, and there are no signs of reversal.

After the news announcement, the price quickly moves up and closes as a bullish candle. In this pair, the Construction Output data get an opposite reaction from the market where the volatility increases to the upside soon after the announcement. Traders can take a ‘short’ position in the market after a suitable price retracement to a key technical level.

EUR/GBP | Before the announcement:

EUR/GBP | After the announcement:

The above charts belong to the EUR/GBP currency pair, where we see that the market is in an overall downtrend before the announcement, and currently, the price is in a retracement mode. Since the British Pound is on the right-hand side of the pair, a down-trending market means the currency is extremely strong. Looking at the price action, we can say that the downtrend will continue and now we need to find the right place to enter the market.

After the news announcement, the price initially goes lower, but the currency gets immediately bought into, and volatility increases to the upside. This was a result of poor Construction Output data were traders bought the currency pair by selling British Pound. As the impact is least, the up move does not sustain, and the downtrend continues.

That’s about ‘Construction Output’ and the impact on its news release on the Forex price charts. Shoot your questions in the comments below, and we would be happy to answer them. Cheers!

Categories
Crypto Market Analysis

Daily Crypto Review, Jun 12 – BTC Plunging To Two-Week Lows; Binance Launching BTC Futures Contracts

The crypto market has plunged over the course of the day, bringing the overall crypto market to a two-week low point. Bitcoin is currently trading for $9,337, which represents a decrease of 5.51% on the day. Meanwhile, Ethereum lost 6% on the day, while XRP lost 5.61%.

The crypto market has plunged over the course of the day, bringing the overall crypto market to a two-week low point. Bitcoin is currently trading for $9,337, which represents a decrease of 5.51% on the day. Meanwhile, Ethereum lost 6% on the day, while XRP lost 5.61%.

The crypto market has plunged over the course of the day, bringing the overall crypto market to a two-week low point. Bitcoin is currently trading for $9,337, which represents a decrease of 5.51% on the day. Meanwhile, Ethereum lost 6% on the day, while XRP lost 5.61%.

DigiByte took the position of today’s biggest daily gainer, with gains of 5.14%. Loopring lost 20.86% 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 65.28%. This value represents a 0.6% difference to the downside when compared to yesterday’s value.

The cryptocurrency market capitalization decreased greatly over the course of the day, with the market’s current value being $264.51 billion. This value represents a decrease of $16.72 billion when compared to the value it had yesterday.

What happened in the past 24 hours

500 Crypto Companies in Estonia losing their permits

Estonia is one of the European Union’s most crypto-friendly countries when it comes to regulation. However, due to the $220 billion scandal regarding money laundering through crypto, Estonia started cracking down on many licensed cryptocurrency companies. So far, over 500 companies have lost their permits.

Honorable Mention

Cryptocurrency exchange powerhouse Binance has just launched a new Bitcoin futures product. The launch came through despite institutional investors visibly showing uncertainty about the future of cryptocurrencies.

In a blog post that came directly from Binance on June 11, the company revealed its quarterly futures contracts product is going live. The first contracts will have a settlement due in September.

_______________________________________________________________________

Technical analysis

_______________________________________________________________________

Bitcoin

The largest cryptocurrency by market capitalization has spent the day plunging to its two-week lows, falling as low as $9,070. The $9,251 line has, however, held up, and BTC is now consolidating above it. The downward-facing move should be over for now as RSI stepped into oversold while the volume faded.


Bitcoin’s volume increased multiple-fold over the course of the price dump but has since returned to its average levels.

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 followed Bitcoin’s initiative to move towards the downside and fell as low as $225. However, the $225.4 support line held up and stopped the move from going any further. Ethereum has recovered slightly and is now trading at a $233 level.


Ethereum’s volume increased drastically during the peak of the move but has since returned to normal. Its RSI level has entered the oversold territory but has (again) returned above it once the pressure faded.

Key levels to the upside                    Key levels to the downside

1: $240                                               1: $225.4

2: $251.4                                           2: $217.6

3: $260                                               3: $198

Ripple

XRP did not stray away from other cryptocurrencies in terms of market direction. The third-largest cryptocurrency by market cap has broken the range it was trading in for a long time as it fell below the $0.2 support level. The downward-facing move reached $0.184 before going up. XRP is still trying to find equilibrium and a place to consolidate at, and it is still uncertain whether that will be above or below the $0.19 level.


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- Building Permits!

https://youtu.be/Ovj5MO_0maA

https://youtu.be/Ovj5MO_0maA

Fundamental Analysis For Novices Building Permits

Welcome to the Fundamental analysis video for novices. In this session, we will be looking at building permits.

So, what are building permits?

Before residential house construction, or business premises can be built, or remodeling projects can commence on such properties, permits have to be granted from an officially approved local government agency to allow contractors to proceed with the work. This allows for standards to be maintained and improved and allows for Governments to keep tabs on what is happening for statistical analysis of their economies.
The actual building permit itself will allow for the structural integrity of the framework, water and sewage lines, fire and gas connectivity, fire protection, zoning, and sanitation.
The granting of building permits varies from country to country because not all home construction and renovation projects require a building permit. However, typically, projects which require major constructional changes and certainly new build projects require building permits.

Building permits within an economy are important indicators of growth or stagnation in particular segments of the economy. An upturn in commercial building permits is a good indication that businesses are expanding. An upturn in home construction is a good indicator that employment is going well and that people are moving homes, buying new homes, and renovating. In other words, there is a need for new homes. These are positive signs that economies are doing well. Conversely, the opposite is true.

There is a knock-on effect with regard to financing, employment, and manufacturing
and supply of associated materials. And so building permits are seen as an important barometer to the financial health of a nation and are carefully observed by economists, analysts and traders.


Each month countries such as New Zealand, in this example, on our economic calendar, releases statistics for their building permits. The information is scheduled for release during the usual business hours of the country in question, and typically in the mornings, and is subject to an embargo.


Let’s take a closer look at the New Zealand permits which are due for release on Monday the 1st of June, we have been inserted red arrows to show you the impact significance of the release, where an updated month on month building permits data for the month of April is due, and where the previous figure for March came in at – 21.3%.

So how to trade using building permits data release?

The larger the economy, the more significant the building permits data release is taken. So let’s take a look at the USA, where the Building Permits report is released by the U.S. Census Bureau on the 18th working day of each month, having conducted a survey of 9,000 permit issuers before publishing their findings into the financial markets. The Census Bureau has been gathering this data since the 1960s.
Typically, a growing number of permits above previous months’ data release is seen to be bullish for an economy, and numbers that are lower than the previous months’ data release are seen to be bearing.


Keep an eye out for the consensus figure which will be updated prior to the release,


And then compare it to the actual number after the release. Markets hate shocks, and therefore if the number is markedly lower than that of the consensus, where professional analysts and economists have been carefully monitoring events in order to draw their conclusions, you might expect a negative effect on the value of that particular country’s currency against other counterparts. But, if the data is higher than expected, then you might see that particular country’s currency gain in strength against other counterparts being traded.

Categories
Forex Videos

Forex Fundamental Analysis For Novices – Factory Orders!

https://youtu.be/Xi-b_m5Q-7Y

https://youtu.be/Xi-b_m5Q-7Y

Fundamental Analysis For Novices Factory Orders

Welcome to the educational video Fundamental Analysis For Novices regarding factory orders
What are factory orders, and what do they tell you as an economic indicator?


Each day when you look at your Economic Calendar, you will see different types of economic events due for release on particular days.
At the top of the economic calendar for Friday the 5th of June, we can see factory orders highlighted for Germany for both year on year and month on month.

Factory orders provide a picture of the financial health of countries that produce durable and non- durable goods. Durable goods are things such as sports equipment, machinery, household appliances, and generally things that are not consumed. Typically they will have a lifespan of a minimum of 3 years. Non-durable goods are produced by consumers and typically have a short shelf life of fewer than three years, Such as toothpaste, laundry detergent, soaps, deodorants, light bulbs, paper plates, and clothing.
Factory orders comprise four sections, new orders, unfulfilled orders, shipments, and Inventories. This data will show whether there is a backlog in production and trends in current sales. All of these taken together will show the strength of the current and future production for an economy.
In America, factory orders are so huge they are reported in the billions of dollars and are released by the Census Bureau of the United States Department of Commerce. All countries report their data as a plus or minus a percentage of previous reports.


The market attaches a certain amount of importance to all economic data releases, and here we can see color bars that depict the impact that the release of this information will have. We can see that the month on month has a higher impact status than the year on year figure.


Hey, we can see that the actual data has been released at 7 AM CET and which was subject to an embargo. And when compared to the consensus, which is what the market was expecting and also the previous release from the month of March, the numbers are badly down at – 36.6 % year on year and -25.8% month on month for April.
These are bad numbers and can be put down to the fall out from the coronavirus pandemic, which has severely affected economic activity around the world.

Germany is the strongest economy in the Eurozone, and analysts and economists, as well as financial traders, keep a particular eye open for this type of underperformance.
Factory orders show an overall direction of an economy. When factory orders increase, it means the economy is expanding, and consumer demand is high for goods. If a country is contracting, it will show up as bad economic data, such as we have just seen for Germany.
INSERT G: How to trade factory orders data release

Look out for the previous factory orders number and compare it to the previous release and, more importantly, the consensus which will have been formulated by economists and analysts. Big differences between the consensus and the actual number can cause market shocks or volatility. Remember, a higher percentage than the previous month and increase year on year indicate that the economy of a country is likely to be improving. This will reflect in higher consumer demand and is good for the exchange rate of a particular currency, which may move higher against its counterparts.
Conversely, if the data release is lower than the previous month and shows a decline this is a sign that the economy of a particular country is stagnating or contracting and therefore there is less consumer demand, and this could have the opposite effect of an exchange rate moving it potentially lower against its counterparts.

Categories
Forex Options

FX Options Market Combined Volume Expiries for 11th 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 11 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

– EUR/USD: EUR amounts

  • 1.1250 915m
  • 1.1350 642m

The EURUSD pair has rejected a multi-month high after the FOMC meeting yesterday. And the current price action on our one hour chart is oversold at position A, but the pair looks to be ignoring this and testing 1.1350 to the downside. If this can hold there is a strong chance the pair will conform to technical analysis until the US data including initial jobless claims out later today when the 1.1350 maturity will come into play.

– GBP/USD: GBP amounts        

  • 1.2695 239m

The GBPUSD pair is oversold on the one hour chart and is finding support at 1.2653 and which shows long tails at this level for the 3 previous candles. US data later today may spur a break from these levels. The 1.2695 maturity remains in play.

– USD/JPY: USD amounts         

  • 107.50 373m
  • 108.00 432m

The USDJPY pair is approaching overbought on the one hour chart. Yesterday’s bearish price action which we brought you broke through the A B C wedge formation. Watch out for a push back to one of the support lines during the European and US sessions and where the 107.50 maturity will remain in play. US economic data release will affect the price action before the cut.

– NZD/USD: NZD amounts

  • 0.6615 233m

NZDUSD pair is trading off of a double bottom support line at 0.6468 and is oversold on the one hour chart It is likely to struggle to find the impetus to reach the maturity without a negative market reaction to the initial jobless claims fro the USA later today.

– EUR/GBP: EUR amounts

  • 0.8995 604m

The EURGBP pair was overbought at 0.8916 (position A) on the one hour chart having found strong support at 0.8890 The O/B was ignored. The pair remains in a bull trend. Today’s maturity remains 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
Forex Course

122. Harmonic Pattern Trading – Gartley Pattern

Introduction

Introduction

Introduction

The Gartley is one of the most traded harmonic patterns in the market. Just like the AB=CD pattern that we discussed in the previous course lesson, the identification and confirmation of the Gartley pattern are based on the Fibonacci levels. Technical traders use this pattern to trade the retracement and continuation that occurs when the trend temporarily reverses before continuing to move in its original direction. This pattern is also referred to as a Gartley222 because the inventor of this pattern, H.M Gartley, first described this pattern on page number 222 in his famous book ‘Profits in The Stock Market.’

Moves Involved In The Formation Of Gartley Pattern 

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

A-B – The AB leg changes its direction and retraces to Fib level 61.8% of the XA leg.

B-C – In the BC leg, price action changes its direction and retraces from 38.2% to 88.6% of the distance that is covered by the AB leg.

C-D – This is the last leg of the pattern, and it reverses again to the downside. It must retrace to 78.6% of the XA leg.

Below is how the fully formed Bullish and Bearish Gartley Patterns look like:

Trading The Gartley Pattern

Bullish Gartley Pattern

The chart below represents the formation of a bullish Gartley pattern on the NZD/USD weekly chart.

In the below chart, the four swing highs and swing lows bind together to form the bullish Gartly pattern. It is crucial to validate the fibs ratios on the price chart. The first XA leg was the bullish move, and the successive AB leg was a bearish move. We can see that the AB move was close to the 61.8% level of the AB leg.

Furthermore, BC is a bullish move, and it is retracing close to the 88.6% fib level of the AB move. The last step was the CD leg, and if this one goes wrong, the whole pattern gets invalidated. However, the CD move was bearish, and it is close to the 161.8% fibs level of the BC leg. The trade activation was at point D, and we have placed the take profit order at Point A.

Bearish Gartley Pattern

The price chart below represents the formation of a bearish Gartley pattern on the EUR/USD 240 Forex pair.

We can observe that the first leg of this pattern was XA, which is a bearish move. It is followed by the reverse in trend printing the AB leg, which is close to the 61.8% extension of the XA leg. The third leg, BC move, was bearish again, and it is close to the 88.6% fibs of the AB move. The last leg is the CD move, and this leg is 161.8% fibs ratios of the BC. The activation was at Point D, and the stop-loss is placed above point D. For take-profit, we have gone for the Point A. You can also partially book your profit at point C and exit your positions at point A.

Conclusion

The confirmation of the Gartley pattern must be done using the fib ratios alone. In the beginning, it can be difficult for you to spot this pattern on the price chart, but you will eventually get used to it. Hence, in the beginning, try to identify & trade this pattern on a demo account. Once you master all the rules involved while trading this pattern, you can go ahead and trade it on the live markets. Cheers!

[wp_quiz id=”76837″]
Categories
Forex Market Analysis

Daily F.X. Analysis, June 11 – Top Trade Setups In Forex – Brace for Eurogroup Meetings!

On the news front, the market will be focusing on the Eurogroup meeting, which is usually held in Brussels and attended by the Eurogroup president, Finance Ministers from euro area member states, the Commissioner for economic and monetary affairs, and the President of the European Central Bank. The agenda will be to discuss upcoming policies considering the economic slowdown driven by the coronavirus. Besides, the U.S. Unemployment Claims will also remain in the highlights today.

On the news front, the market will be focusing on the Eurogroup meeting, which is usually held in Brussels and attended by the Eurogroup president, Finance Ministers from euro area member states, the Commissioner for economic and monetary affairs, and the President of the European Central Bank. The agenda will be to discuss upcoming policies considering the economic slowdown driven by the coronavirus. Besides, the U.S. Unemployment Claims will also remain in the highlights today.

On the news front, the market will be focusing on the Eurogroup meeting, which is usually held in Brussels and attended by the Eurogroup president, Finance Ministers from euro area member states, the Commissioner for economic and monetary affairs, and the President of the European Central Bank. The agenda will be to discuss upcoming policies considering the economic slowdown driven by the coronavirus. Besides, the U.S. Unemployment Claims will also remain in the highlights today.

Economic Events to Watch Today

 

 

EUR/USD – Daily Analysis

The EUR/USD pair was closed at 1.13753 after placing a high of 1.14222 and a low of 1.13214. Overall the movement of the EUR/USD pair remained bullish throughout the day. The EUR/USD pair rose to its three months highest level on Wednesday after the Federal Reserve’s monetary policy decision. The currency pair crossed the level of 1.1400 on the back of broad-based U.S. dollar weakness that day.

The Fed left its interest rates unchanged at 0-0.25% on Wednesday and projected a contraction of 6.5% this year along with the unemployment reaching 9.3% for this year. Furthermore, the bank has shown its commitment to support the credit flow to household and business by increasing its Treasury security purchases.

Though negative interest rate was not expected from the Fed but taking the pledge to keep the interest rates at low near zero until market participants did not expect 2022, this moved the investors to sell the U.S. dollar, which in turn gave a push to EUR/USD pair.

Adding in the upward movement of EUR/USD pair on Wednesday was the poor than expected economic data from the U.S. At 17:30GMT, both CPI & Core CPI readings from the U.S. came in as -0.1% against the expected 0.0% during May and exerted pressure on the U.S. dollar. AT 23:00 GMT, the Federal Budget Balance showed a deficit of 398.8B against the expected deficit of 580.0B and weighed on the U.S. dollar.

The broad-based U.S. dollar weakness pushed EUR/USD pair above 1.1400 level on Wednesday. While the U.S. Dollar Index also fell to 3 months low against its rival currencies. U.S. stocks also turned negative and posted losses on Wednesday.

On the other hand, at 11:45 GMT, the French Industrial Production was dropped by -20.1%against the expected -10.0% during April and weakened Euro. Furthermore, On Wednesday, the European Commission said that Russia and China were running targeted influence operations and disinformation campaigns in the European Union and its neighborhood and also around the globe.

Daily Support and Resistance

  • R3 1.1522
  • R2 1.1473
  • R1 1.1422

Pivot Point 1.1372

  • S1 1.1321
  • S2 1.1271
  • S3 1.122

EUR/USD– Trading Tip

The EUR/USD continues to trade sideways in a narrow trading range of 1.1400 – 1.1348 level, and right now, it seems to test the lower boundary of this range. On the lower side, the next target level appears to be 1.1270. Currently, the pair is facing immediate support around 1.1340 level, and closing of candles above this level may lead the EUR/USD prices to further lower towards 1.1400. The 50 EMA is also suggesting a bullish bias for the EUR/USD pair as the pair has closed a Doji candle right above the EMA. On the higher side, a violation of 1.1400 resistance can lead to EUR/USD prices until 1.1465. Odds of bullish bias remains solid today.

GBP/USD – Daily Analysis

The GBP/USD pair was closed at 1.27457 after placing a high of 1.28130 and a low of 1.27060. Overall the movement of GBP/USD pair remained bullish throughout the day. The currency pair GBP/USD continued its bullish trend for the 10th consecutive day and maintained its bullish streak on Wednesday on the back of the latest monetary policy decision by Federal Reserve.

On Wednesday, the U.S. Fed announced its monetary policy decision in which it held its interest rates on the same level near zero and did not go for negative interest rates. However, the Fed also announced to hold the interest rates at the same level until the end of 2022. Federal Reserve also announced that over the coming months, it would increase the holdings of Treasury securities and agency residential and mortgage-backed securities at the current level to support the credit flow to households and businesses. This all was decided to sustain smooth market functioning and defend the U.S. economy.

Additionally, the Open market Desk will continue to offer large-scale overnight and term repurchase agreement operations. The Committee will keep a close eye on market conditions to adjust its plans as needed.

The DXY fell off from 96 levels and was down by 0.5% on Wednesday, the dovish statement from Fed weighed on the U.S. dollar and hence, GBP/USD pair reached near 3-months highest level.

On the other hand, Brexit trade negotiations did not go well between the U.K. and Brussels, and the U.K. wanted to reach an agreement with the E.U. this year. There are no chances of even any progress in trade talks with the deadline to seek an extension coming closer day by day.

According to the boss of the U.K.’s most influential business group, the CBI, U.K.’s economy was not ready to withstand the additional disruption of no-deal Brexit. The furlough scheme and grants will end at once, and then thousands of businesses and millions of jobs will likely hit the water. A CBI member, Carolyn Fairbairn, said that British firms do not have the resilience to cope with leaving the European Union without any deal after the losses of the coronavirus crisis.

On Wednesday, GBP/USD prices rose above the level of 1.27710 but dropped below it and continued moving in a confined range. The surge in prices was due to the broad-based U.S. dollar weakness after the Fed’s statement and economic data release. At 17:30, The CPI & Core CPI for May from the U.S. showed a decline of 0.1% against the expected 0.0% and weighed on the U.S. dollar. The weak dollar pushed GBP/USD pair on the higher level.

Daily Support and Resistance

  • R3 1.2912
  • R2 1.2863
  • R1 1.2804

Pivot Point 1.2755

  • S1 1.2696
  • S2 1.2647
  • S3 1.2588

GBP/USD– Trading Tip

The GBP/USD pair is trading with a bearish bias at 1.2650 level ever since it has violated the upward channel on the lower side. On the 4 hour timeframe, the Cable has closed a strong bearish engulfing candle, which suggests a dominance of sellers in the market as this can trigger selling until 1.2625 level. Immediate support can be found around 1.2625, while a breakout of this can trigger more selling until the next support level of 1.2582 level. Let’s look for selling trades below 1.2690 level today. 

USD/JPY – Daily Analysis

 The USD/JPY pair was closed at 107.123 after placing a high of 107.872 and a low of 106.987. Overall the movement of the USD/JPY pair remained bearish that day. AT 4:50 GMT, the Core Machinery Orders from Japan for April dropped to -12% against the expected -7.5% and weighed on Japanese Yen. The PPI for the year from Japan was declined by 2.7% against the expected decline of 2.4% and exerted pressure on JPY.

On the other hand, at 17:30 GMT, the CPI and the Core CPI during May from the United States was dropped to -0.1% from 0.0% of expectations and weighed on the U.S. dollar. The Federal Budget Balance for April was declined by 398.8B against the expected 580.8B.

The poor than expected CPI & Budget data from the United States on Wednesday weighed on the U.S. dollar, which dragged down the USD/JPY pair with itself. Furthermore, the dovish statement from the Federal Reserve will keep its interest rates on hold at a level near zero until the end of 2022. U.S. economy was not in good condition, and the projections made by the Fed about the economic contraction this year was 6.5% and of unemployment to be raised by 9.3.

Fed reduced its interest rates in March to near zero amid coronavirus crisis and said that until the economy was back on track Federal Reserve has pledged to maintain low rates. Fed has provided trillions of dollars to its financial system, Treasury purchases to support business, state, and local governments. It also started a new program to lend to small, medium-sized firms. Wall Street, major indices such as the S&P 500 and Dow Jones Industrial Average were negative that day, and the U.S. dollar index also fell to fresh three months low against major currencies.

Daily Support and Resistance    

  • R3 108.58
  • R2 108.23
  • R1 107.67

Pivot Point 107.33

  • S1 106.77
  • S2 106.43
  • S3 105.87

USD/JPY – Trading Tips

The USD/JPY is trading sharply bearish below 107.100 level, having violated the upward trendline at 107.600. Below this, the pair has a great potential to go for a 107.08 level, while a bearish breakout of 107.082 can dip further until 106.770. On the 4 hour chart, the MACD, and RSI, both are holding in the selling zone, demonstrating that there’s further room for selling in the USD/JPY pair. Let’s consider taking selling trades below 107.33 today. Good luck! 

Categories
Forex Assets

XTZ/USD – Trading Costs Involved While Trading This Crypto-Fiat Pair

Introduction

Introduction

Introduction

Tezos is a platform that supports the development of DApps and smart contracts. It was created by an ex-Morgan Stanley analyst Arthur Breitman who launched an Initial Coin Offering (ICO) in 2017, raising $232 million. The next year, Tezos launched its beta network in July.

Tezos works by giving incentives to users willing to participate in the development of its protocol. Note that the complete network is decentralized. Users cannot mine Tezos coins as it based on the Proof-of-stake mechanism, unlike the Proof-of-Work in Bitcoin blockchain. Tezos is powered with its own XTZ token, which is created through a process called “baking.”

Understanding XTZ/USD

The price of XTZ/USD depicts the value of the US Dollar equivalent to on Tezos. It is quoted as 1 XTZ per X USD. For example, if the XTZ/USD’s market price is 2.9157, then each XTZ will be worth 2.9157 US dollars.

XTZ/USD specifications

XTZ stands 11th in terms of market capitalization on CoinMarketCap. Forex brokers typically allow trading of only the top 3 or top 5 for trading. So, most brokers do have XTZ enabled for trading. Thus, you will have to approach a cryptocurrency broker instead. They work quite differently from that of the forex broker. For example, instruments are traded in lots with forex brokers, unlike cryptocurrency exchanges.

Spread

Spread is the difference between the buying and selling price of the cryptocurrency. These prices are set by individual traders and not the exchange.  Thus, the spread always varies. Hence, we shall not be considering the spread in further calculations.

Fee

There are a number of fees charged by exchanges for trading cryptos. Below are some types of fees levied by most exchanges.

  • Execution fee (Taker or Maker)
  • 30-day trading volume fee
  • Margin opening fee, if applicable

Note that, the taker or maker fee is charged twice – for opening and closing the trade.

Example

  • Long 1,000 XTZ/USD at $2.9169
  • 30-day volume fee is 0.12%
  • Order is executed as Maker
  • Without Leverage

Total cost of the order = 1,000 x $2.9169 = $2916.9

Assuming the maker fee to be 0.16%, the opening fee will be – $2916.9 x 0.16% = $4.66

In addition, there is 0.12% fee for 30-day volume fee – $2916.9 x 0.12% = $3.50

Since the trade is opened without leverage, the margin opening fee will be $0.

If the order is closed at $2.9605, the total cost of closing will be – 1,000 x $2.9605 = $2960.5. The fee for closing will be:

$2960.5 x 0.16% = $4.73

Therefore, the total fee for this trade can be calculated as:

$4.66 + $3.50 + $4.73 = $12.89

Trading Range in XTZ/USD

The trading range in cryptocurrencies is different from that of foreign exchange. In forex, we calculated the pip movement using the ATR indicator and multiplied it with the pip value to find its worth. Since in cryptocurrency exchanges, there is no concept of pips. So, instead of representing the pip movement, we directly represent the value/worth of the price movement into the table.

The below table represents the value of the price movement for 1,000 quantities of XTZ/USD.

Note: the above values are for trading 1,000 units of XTZ/USD. If X units of the pair are traded, then the ATR values will be,

(ATR value from the table / 1,000) x X units

Procedure to assess ATR values

  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.

XTZ/USD Cost as a Percent of the Trading Range

Cost as a percent of the trading range represents the relative cost in terms of percentage. It is calculated by finding the ratio between the total cost and the ATR value. The comprehension of it shall be discussed in the subsequent topic.

Taker Execution Model

Opening = $7.58 | Margin fee = $0 | Closing = $7.69 | 30-day volume = $3.50

Total fee = Opening + Margin fee + Closing + 30-day volume = $7.58 + $0 + $7.69 + $3.50 = $18.77

*Assuming taker fee to be 0.26% the trade value.

Maker Execution Model

Opening = $4.66 | Margin fee = $0 | Closing = $4.73 | 30-day volume = $3.50

Total fee = Opening + Margin fee + Closing + 30-day volume = $4.66 + $0 + $4.73 + $3.50 = $12.89

Interpretation of Cost as a Percent of the Trading Range

Firstly, the trading range table, in simple terms, depicts the approximate dollar profit/loss on the trade. For instance, let us consider the average value on the 4H timeframe, which is 71.5. This means that one can gain or lose an average of $71.5 in a matter of 4 hours or so.

With respect to the percentage table, the value of the percentage signifies how expensive the costs are relative to the time frame and profit or loss generated. In other sense, the cost remains the same irrespective of the time frame you trade. For example, let us consider the average percentage on the 4H time frame, which is 18.03%, and the average on the 1H, which is 34.01%. In both cases, the overall is the same, but the cost relative to the profit made, the cost appears to be higher in the 1H time frame because the profit amount is lower than the 4H time frame because there is more price movement on the 4H time frame.

Trading the XTZ/USD

Tezos is under the top 15 in market capitalization according to the data from CoinMarketCap. This signifies that it is intensively traded in the market. Most of the buying and selling happens in the cryptocurrency exchanges.

There are two types of traders – short term and long term. A short term trader may trade the 1H, 2H, 4H, or the 1D time frame, while a long term trader may go with the 1W or 1M time frame. Also, irrespective of the time frame, one must trade when the market volatility is around the average, or maximum value to relatively reduce fees on the trade.

Categories
Crypto Market Analysis

Daily Crypto Review, Jun 11 – Chinese Crypto Traders’ Bank Accounts Getting Frozen; BTC Attempting To Break $10,000

The crypto market has spent the day with increased volatility as Bitcoin was trying to pass the $10,000 mark.  While the level got rejected once again, the price increase did happen. Bitcoin is currently trading for $9,941, which represents an increase of 1.69% on the day. Meanwhile, Ethereum gained 2.18% on the day, while XRP gained 0.81%.

The crypto market has spent the day with increased volatility as Bitcoin was trying to pass the $10,000 mark.  While the level got rejected once again, the price increase did happen. Bitcoin is currently trading for $9,941, which represents an increase of 1.69% on the day. Meanwhile, Ethereum gained 2.18% on the day, while XRP gained 0.81%.

The crypto market has spent the day with increased volatility as Bitcoin was trying to pass the $10,000 mark.  While the level got rejected once again, the price increase did happen. Bitcoin is currently trading for $9,941, which represents an increase of 1.69% on the day. Meanwhile, Ethereum gained 2.18% on the day, while XRP gained 0.81%.

Aave took the position of today’s biggest daily gainer, with gains of 20.26%. WAX lost 20.34% of its daily value, making it the most prominent daily loser.

Bitcoin’s dominance increased since we last reported, with its value currently at 65.34%. This value represents a 0.14% difference to the upside when compared to yesterday’s value.

The cryptocurrency market capitalization increased slightly over the course of the day, with the market’s current value being $281.26 billion. This value represents an increase of $3.57 billion when compared to the value it had yesterday.

What happened in the past 24 hours

Are Chinese bank accounts getting frozen by the government?

Almost 4,000 Chinese bank accounts have reportedly been frozen by the local government due to cryptocurrency trading. According to a report published on Monday, the Chinese police force froze the bank accounts of thousands of OTC traders from the Chinese province of Guangdong.

The report stated that the authorities started freezing bank accounts on Thursday. While the law enforcement is claiming that they are freezing only accounts tied to illicit activities, retail investors saw their bank account frozen after buying cryptocurrency on credible crypto exchanges.

_______________________________________________________________________

Technical analysis

_______________________________________________________________________

Bitcoin

The largest cryptocurrency by market capitalization has spent the day preparing for a move towards the upside. The price attempted to break the $10,000 threshold several times, each time being unsuccessful. However, even though the price point got rejected, Bitcoin gained some value and managed to pass $9,870 (which is being tested at the time of writing).


If Bitcoin manages to pass $10,000, it can face resistance above the $10,300 level.

Key levels to the upside                    Key levels to the downside

1: $10,010                                         1: $9,870

2: $10,355                                         2: $9,735

                                                           3: $9,580

Ethereum

Ethereum also made a move towards the upside while attempting to break its resistance level of $251.4. While the break is (so far) unsuccessful, it seems like the second-largest cryptocurrency by market cap has strong support in both the $240 level and the 21-period moving average, which means that the price will not dramatically fall without a fight.


Ethereum’s volume increased drastically during the peak of the move towards the upside but started to fade as the $251.4 level kept resisting.

Key levels to the upside                    Key levels to the downside

1: $251.4                                            1: $240

2: $260                                              2: $225.4

                                                           3: $217.6

Ripple

XRP stayed in its tight range over the course of the day, bound by the $0.2 support and $0.205 resistance level. While its price increased slightly, XRP didn’t make a determined move towards the upside (like Bitcoin and Ethereum did).


While scalp traders might enjoy the ranging moves, a confirmed break to either the upside or downside will benefit any trader as the move would most likely be easy to spot and profit from.

Key levels to the upside                    Key levels to the downside

1: $0.205                                           1: $0.2

2: $0.214                                           2: $0.19

 3: $0.227                                                        

 

Categories
Forex Fundamental Analysis

‘Employed Persons’ – Impact Of This Fundamental Driver On The Forex Market

Introduction

Introduction

Introduction

The number of people who hold a legal job, or conversely, the percentage of unemployed people is a direct gauger for a country’s economic health. It is one of the most obvious and direct reflectors of a nation’s health. Common people often misinterpret the rate of employment or unemployment as we will see next, Due to which a good background understanding of what such numbers reflect is paramount for economic analysis.

What is Employment?

An individual who gets paid for a certain work he/she performs is said to be “Employed.” People work to earn a living and make ends meet at the most basic level and once these requirements are met people work to improve their standard of living through more work or better work or switching place of work etc.

There are a variety of modes through which an individual within a nation can find work. For example, an individual can be a freelancer or a regular employee in an organization or even run his or her own business and be called self-employed.

How is the Employed Persons’ Statistic calculated?

In this regard, The Bureau of Labor Statistics (BLS) has left no stone unturned. The range of data that is available with them regarding the employment situation is huge. BLS surveys and tracks monthly employment and unemployment situation within the country and classifies them based on geographical region, sex, race, industry, etc.

The technique employed by BLS is called the Current Population Survey (CPS). Since asking every individual in the country every month about his employment status and verifying those details is an impractical task Government employs CPS to survey the data.

CPS survey takes in about sixty thousand eligible households. The selected households, going to be surveyed, are representative of all geographical locations within the nation hence making it a miniature version of the country’s population. The authorities also take care of not repeating the same surveyed members in succession and make sure that no one household is survey consecutively more than four times.

Neither the surveyor nor the surveyed person does not directly ask or get to decide their employment status. The surveyors ask a specific set of questions which and the responses to these questions are decoded by computer algorithms to determine the status of the individual automatically. Once the data is collected and calculated, based on a wide variety of factors, like race, ethnicity, age, gender, and residing state, they are categorized.

Why is the Employment Situation important?

The Employment Situation report published by the Bureau of Labor Statistics in the United States goes as far back as the 1940s. Hence, there is good confidence in the data set due to its range and good accuracy in assessing and predicting economic activity within a nation.

The importance of employment rate, employment-to-population ratio, unemployment rate, or any other employment metric is understood when we understand the interaction of various economic factors on each other and how one coherently affects the other.

If the number of employed people within a country increases, it means the number of people who are getting paid is more, which means more money is in circulation in the economy;  This means that more people now have the purchasing power to procure produces and thereby increasing the overall consumption of goods and services within the nation. When the consumption is on the rise, it means the demand is on the rise, which makes the business flourish, which in turn can increase the need for more employment or give the industries a good push towards growth. Overall, either more people will be employed, and some of the currently employed sections of people may enjoy better pays over time due to flourishing business.

We understand here there is positive feedback within an economy where one section feedback into other sections of the society and growth compounds and macroeconomic metrics like Gross Domestic Products reflect these positively, giving further confidence to policymakers, investors, and foreign businesses.

Here we have seen above how such a simple statistic can imply such big macroeconomic conditions of a nation. No wonder why BLS has such a diverse set of employment survey statistics released every month, which receives such huge media attention. For instance, Every month, when the nonfarm payroll numbers also are released, it is closely watched by many analysts, people in business, investors, and traders all over to make critical decisions. Employment reports based on industrial sectors can also give investors a good idea of different sector’s performances and help them make informed investment decisions.

How can the Employed Persons’ Report be Used for Analysis?

As useful as the Employment reports that are released every month, they are equally tricky to understand. For example, below is a snapshot of “All Employees, Total Nonfarm (PAYEMS) ” from the St. Louis Federal Reserve Economic Data (FRED)

When we see the above graph, one might think that the nation’s economy has been continuously growing, but that is not the case as the employment graph here is simply a function of population. Certainly, the population has increased from 1940 to 2020; hence the graph may seem increasing, but it is not solely because of improvements in the economic conditions of the country. We should also pay attention as some of the statistics of employment are not seasonally adjusted values meaning that during certain months of the year employment is on the low, and conversely, there seems to be an increase in unemployment like in January and February where seasonal jobs like construction are on a slowdown. Hence low numbers during these periods do not signal an economic contraction or slowdown in the economy.

Unemployment rate statistics are also used by Policymakers to assess causes of unemployment and take the necessary action to rectify the same. Investors use to assess the performance of certain industrial sectors before deciding to invest within a particular sector of a country. Many people use different categories of employment and unemployment statistic to analyze which sectors are facing slowdowns, layoffs, and which sectors have possible employment opportunities.

Apart from all these media, institutions, economic analysts all use these statistics in its diverse forms for their specific purposes.

Sources of Employment Reports

The U.S. Bureau of Labor Statistics is responsible for releasing this data, and that data can be found here – Employment | Unemployment

You can also find the data related to Employed Persons on the St. Louis Fed website.

Impact of the ‘Bank Lending Rate’ news release on the price charts

Just as how the unemployment rate plays a major role in fundamental analysis and determines the state, the economy, employment level is an equally important fundamental indicator. The employment level measures the number of people employed during the previous quarter. It gives the number of jobs created in an economy during a quarter. We understood in the previous section of the article that Job Creation is directly related to consumer spending. Therefore, it is a high impactful event. Even though most countries release unemployment data on a monthly, there are few countries that announce the number of Employed Persons in a quarter.

In today’s article will be analyzing the 4th quarter employment data of Switzerland, which was released in the month of February. A forecasted data of Employment level is not available as investors rely more on the unemployment rate for making investment decisions. The Employment level of Switzerland is released by the ‘Federal Statistical Office.’ A higher than previous reading is taken to be positive for the currency, while lower than previous reading is considered to be negative.

EUR/CHF | Before the announcement:

We shall start with the EUR/CHF currency pair where, in the above chart, we see that before the news announcement, the market has shown signs of reversal and is getting ready for a major event. Technically, the chart is in a perfect spot for taking a ‘short’ trade as this is a perfect reversal pattern. Therefore, aggressive traders with large risk appetite can enter the market with bigger stop loss since there can be a sudden surge in volatility after the news release. However, conservative traders should wait for the announcement and then take a suitable position.

EUR/CHF | After the announcement:

As we can see in the above chart, the price quickly goes up until its most recent high but immediately gets sold. The reason behind this increase in volatility to the upside is a lower number of employed persons in the 4th quarter compared to the previous quarter. Since the data was weak, traders sold Swiss Franc and bought Euro.

But later we notice that the candle leaves a big wick on the top and closes near its opening price. This means the data was not hugely worse, and since it was close to the previous quarter’s reading, there is a shift in volatility to the downside. This wick is a confirmation sign of the reversal, and now we can enter the market with a lower risk.

USD/CHF | Before the announcement:

USD/CHF | After the announcement:

The above images represent the USD/CHF currency pair where before the news announcement, we see a ranging action of the market and presently approaching the support area. Since the market is already volatile here, a news release can essentially augment this volatility on either side. In such market situations, one should wait for the news release and then take a position based on the data. However, the ‘options’ market can offer an advantage of this volatility and hence can be traded by few.

After the news announcement, the currency moves similarly as in the above pair, where the volatility initially increases on the upside and later retraces back. An important thing we need to notice here is, we are very close to the support area, and hence going ‘short’ can be risky. This is how technical analysis can be useful.

GBP/CHF | Before the announcement:

GBP/CHF | After the announcement:

Before the news announcement, we see that the GBP/CHF currency pair is in an uptrend pointing towards the weakness of Swiss Franc. This chart seems to be behaving opposite to that of EUR/CHF, where the uptrend is very strong with no sign of reversal. One of the reasons for this trending nature could be due to the strength in British Pound with little influence of Swiss Franc.

After the news announcement, we observe that the Employment data has the least impact on this pair, and the price fails to fall below and remains above the moving average. Since we don’t witness a drastic change in volatility, the only way to trade this pair is by waiting for an appropriate retracement and using technical indicators to join the trend.

That’s about ‘Employed Persons’ 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 Basic Strategies

Pro Scalping Technique By Combining Stochastic With Bollinger Bands

Introduction

Introduction

Introduction

Scalping is a trading strategy that helps traders to take advantage of minor price movements on lower timeframes. It is one of the quite popular ways of trading the Forex market. There are many successful scalpers who make a lot of money by scalping the minor price moves. To be a scalper, we must be emotionally intelligent and have the ability to make quick decisions.

Scalpers place anywhere from 0 to a few hundred trades in a single day. Ideally, smaller movements in price are easier to catch compared to the longer moves. Typically while day trading, if the win/loss ratio is less than 50 percent, traders still make money. On the other hand, in scalping, it is critical to win most of the trades. Otherwise, we will end up on the losing side.

Stochastic Oscillator

Stochastic is a wonderful indicator developed by George C. Lane in late 1950. This indicator doesn’t follow the price or volume like other popular indicators in the market.  Instead, it follows the speed and momentum of the changes that occur in price before the trend formation. Stochastic is a range bounded indicator, and it oscillates between the 0 and 100 levels.

Typically, a reading above 80-level is referred to as the overbought signal, and a reading below the 20-level indicates an oversold signal. The Stochastic indicator consists of two lines, where one reflects the actual value of the indicator for each session, and another reflects its three-day simple moving average. The intersection of these lines indicates the reversal in price action.

Bollinger Bands

Bollinger Bands is a technical indicator developed by John Bollinger in the 1980s. It is a leading indicator, and it consists of two bands and a centerline. Out of the two bands, one stays above the price action, and the other stays below. Both of these bands contract and expand depending on the market’s volatility. When price action hits the lower band, it indicates a buy trade, and when it hits the upper band, it indicates a sell trade.

The Strategy

The strategy we are going to discuss is one of the most basic but effective scalping strategies ever used in the market. The idea is to apply both indicators (Bollinger Band & Stochastic) on the price chart. When the price action hits the lower Bollinger band, and the Stochastic is at the oversold area, it is an indication for us to go long. Conversely, when the price action hits the upper Bollinger band and if the Stochastic is at the overbought area, we can go short.

In the chart below, we can see that our strategy has generated a few buy/sell signals in the EUR/AUD Forex pair. The price action was in an overall uptrend. When both of the indicators gave us the signal, we took both buy and sell entries accordingly. In the chart below, the buy trades have given us some good profits, but in the sell trades, the profit was comparatively less. Always remember that these things are quite common in scalping. If you are an aggressive scalper, trade both buy sell signals. But if you are a trader who prefers to scalp the market with the trend, follow the next strategy.

Scalping The Market By Following The Trend

Buy Example

The chart below represents an uptrend in the EUR/AUD Forex pair. As you can see, by following our strategy, this pair has given us three buy signals, and all the trades were quite healthy and have performed well in the market. If you scalp the market by following the trend, it is easy to make big gains. For scalping, it is required to put smaller stops. Hence, always go for 4 to 5 pip stop-loss and 10 to 15 pip target. You can also exit your positions when the price hits the upper Bollinger band.

Sell Example

The below 3-minute chart of the GBP/JPY forex pair represents a couple of sell trades. As you can see, all the sell trades in this pair performed very well. We can also observe that every time the price action prints a brand new lower low. We took all the five selling trades on a single trading day, an all of them hit the take-profit range. So if we scalp the market by following the trend, it will be quite easy to make some profits from the market. The red arrows on the Stochastic and Bollinger Band indicators represent the sell signals.

Scalping The Ranges

Just like the trends, it is easy to scalp the ranges as well. In fact, the ranges are even easier to scalp than the trend because the support and resistance lines of the range offer extra signals for us. For ranges, all you need to do is to hit the sell when price action hits the top of the range and hit buy when prices hit the range bottom. If you add the Bollinger Bands and Stochastic indicator, the signals generated by the market will be stronger.

The chart below indicates a couple of buy/sell signals in the GBP/JPY 3-minute Forex chart. As you can see, we have gone long when prices hit the bottom of the range, combined with our strategy. The same applies to the sell-side. We have gone short when the price action hits the top of the range while respecting our strategy rules.

Conclusion

Scalping trading involves entering a trade for a shorter period of time to take advantage of small price fluctuations. When you enter a trade, it is advisable to risk lesser money and place as many trades as you can. We must have control over our inner greed and aim for smaller targets. In the beginning, it will be difficult for you to scalp the market as the smaller timeframes move way faster. You need to train your eyes a bit to understand the lower timeframes properly. Always try to scalp with a bigger trading account because the trading commissions can quickly eat up the smaller accounts.

Categories
Forex Videos

Fundamental Analysis For Novices Markit Manufacturing PMI!

https://youtu.be/lZ9hYU72_RE

https://youtu.be/lZ9hYU72_RE

 

Fundamental Analysis For Novices Markit Manufacturing PMI

Welcome to the educational video on fundamental analysis, and this one is about, Markit manufacturing PMI.
The PMI element is the Purchasing Managers’ Index and is compiled by IHS Markit for over 40 major economies throughout the world. The information is updated month on month and released subject to an embargo at certain times, depending on the country.


And so if you are keeping an eye on your economic calendar, you would expect to see something like this for Markit Manufacturing PMI’s.


So the first one due on Monday, June 1st, is Spain.

The bar on this type of calendar shows the impact the news release will have in the financial markets, pertaining to the economic conditions of the country and as a part of the Eurozone, where Spain shares the common currency.


And then we have the previous month’s release, which was 30.8, the consensus by market analysts for this month’s figure, which is 38.1.

 


And when the figure is released at 7:15 a.m in Europe, the actual number will appear here.
The PMI, which stands for the purchasing managers index, is a snapshot of business conditions in the manufacturing sector for each country. Manufacturing is a huge component of a country’s gross domestic product, and therefore provides a picture of the overall economic conditions and financial health of a nation, in this case, Spain.

Generally speaking, a result above 50 signals bullish sentiment for the Euro, whereas a result below 50 is seen as bearish. Obviously, Spain is only one of 19 countries that use the Euro and one of 27 Eurozone member states, and because its economy is small in relation to some of the other country’s it has a lower impact.


Here we can see that the impact bar is higher for Germany because it has a larger economy than Spain, and therefore its relevance is greater because Germany contributes more to the Eurozone coffers.


Similarly, the impact for Great Britain is of high importance.


And when it comes to the United States, the PMI is very widely anticipated because it has a huge impact on the American economy and also because the US Dollar is the dominant currency in the world.
In the United States, this data is collated by a company called the Institute for Supply Management, or ISM and where they measure the manufacturing activity of more than 300 manufacturing firms across the USA, and where the monthly report, which is also referred to as the ISM Manufacturing Index, is announced on the first business day of each month, in line with most other countries, and where a reading below 50 suggests a contraction in manufacturing and where a number above 50 suggests expansion and where a reading of 50 means no change.

So how to trade the market manufacturing PMI and the ISM manufacturing index. Remember, we are looking for numbers above or below 50 and where above 50 is bullish and good for an economy, in which case you might expect to see a country’s currency exchange rate getting stronger. Conversely, numbers below 50 indicate a contraction in manufacturing for that country, and therefore this is a bearish number, and you might expect to see that country’s currency exchange rate move lower.

You will very likely find extreme volatility when the PMI numbers are released and are completely out of line with the market consensus. Markets do not like shocks, and when they occur, it creates market volatility.

Categories
Forex Price-Action Strategies

Do not Forget to Check the Daily Chart

In today’s lesson, we demonstrate an example of an H4 chart and try to evaluate its price movement after breakouts. The chart shows that the price makes three breakouts altogether. The first two breakouts do not create that much momentum towards the breakout, but the last one does. We try to find out the reason behind it.

In today’s lesson, we demonstrate an example of an H4 chart and try to evaluate its price movement after breakouts. The chart shows that the price makes three breakouts altogether. The first two breakouts do not create that much momentum towards the breakout, but the last one does. We try to find out the reason behind it.

In today’s lesson, we demonstrate an example of an H4 chart and try to evaluate its price movement after breakouts. The chart shows that the price makes three breakouts altogether. The first two breakouts do not create that much momentum towards the breakout, but the last one does. We try to find out the reason behind it.

This is an H4 chart. The chart shows that the price makes a bullish move and consolidates. It seems that the price has found its support since it has already produced a bullish engulfing candle. The buyers may go long in the pair above consolidation resistance.

The chart shows that consolidation resistance is a strong level of resistance where the price gets rejection several times. Since it is an H4 chart, three times rejections, on the same level, means that it is a daily level of resistance. Thus, an H4 breakout may not create that much momentum all the time.

The chart shows that the price after making a breakout consolidates for a long time again. It is because of the daily resistance factor. The daily candle confirms the breakout. Thus, the price in the H4 chart consolidates. Look at the last candle. This comes out as a bullish candle breaching consolidation resistance. Let us find out what happens next.

The last H4 bearish inside bar is the last candle of the day. It means the daily candle comes out as a bullish candle after the daily breakout, breakout confirmation, and daily reversal candle.

The price consolidates with one more candle to start the next trading day. A bullish reversal candle may push the price towards the North with good bullish momentum. Since the chart now belongs to the H4 traders as well.

Here it is. The chart produces a bullish engulfing candle closing well above consolidation resistance. The length of consolidation is shallow. However, the bullish reversal candle looks to be a perfect signal candle.

There she goes. The price heads towards the North with extreme bullish momentum. The last candle suggests that the price may continue its bullish journey. Let’s look at the last move. The price does not consolidate with enough depth, but it makes a strong bullish move. On the other hand, on the first two occasions, it consolidates well, but its breakout does not create good momentum. It is because, on the first two occasions, there is a daily resistance factor. The level of daily resistance makes the H4 traders wait for more. Once the price makes a breakout on the daily chart, it heads towards the breakout direction with good momentum. The H4 traders are to check the daily chart before taking entry. This is one more reason to check that one thoroughly.

Categories
Forex Market Analysis

Allianz Rejection to Signal a new Bearish Wave

Allianz (XETRA:ALV), a German-based financial company, sinks near 3% in the current week after having completed a zigzag pattern (5-3-5) when the price reached the level of €194.76 per share.

Allianz (XETRA:ALV), a German-based financial company, sinks near 3% in the current week after having completed a zigzag pattern (5-3-5) when the price reached the level of €194.76 per share.

Allianz (XETRA:ALV), a German-based financial company, sinks near 3% in the current week after having completed a zigzag pattern (5-3-5) when the price reached the level of €194.76 per share.

ALV exposes in its 2-hour chart the rejection in the zone of the upper line of the ascending channel that converges with the pause zone of the first downward sequence started on February 21ts when the price topped at €232.60 per share.

In the previous chart, we observe that ALV completed its first bearish three-wave sequence corresponding to wave A of Minor degree labeled in green. In this first leg, we distinguish that Allianz, in its last move, developed a terminal Elliott wave pattern corresponding to an ending diagonal that was completed on March 19th when the stock price found fresh buyers at €117.10.

Once the price jumped in a three-wave sequence, ALV raised until €163.74 per share, completing the wave (i) of the Minuette degree labeled in blue. This movement reveals an overlapped structural series that corresponds to a leading diagonal.

According to the Elliott wave principle, a leading diagonal tend to appear in waves 1 or A. Its internal structure follows a subdivision as 3-3-3-3-3. In the figure, we observe that the leading diagonal pattern ended at €177.40 per share, where the price found fresh sellers and completed its wave ((a)) of Minute degree labeled in black.

The breakdown of the intraday trendline that advances with wave (v) of ((a)) validated the end of wave ((a)) and the start of a new movement corresponding to wave ((b)). This new corrective move carried down to ALV to find support at €139.78 per share on May 14th, where the German financial company found the incorporation of fresh buyers, who moved the market in an upward five-wave sequence corresponding to wave ((c)) of Minuette degree in blue.

The third movement corresponding to wave ((c)) of Minute degree, which belongs to the corrective structure of upper-degree, developed its rally in a five-wave sequence until the level €194.76. This move shows its fifth internal wave as an extended move.

Following the Elliot Wave Theory, we can observe that the retracement that Allianz is starting to develop could drag to the stock price until the zone of the beginning of wave (v) in blue, where the price should find support.

In conclusion, our preferred positioning remains on the bearish side until the zone that marks the beginning of wave (v) of the Minuette degree.

Categories
Crypto Market Analysis

Daily Crypto Review, Jun 10 – Crypto Ransomware Cartels Forming; Market Preparing For A Move

The crypto market has spent the day without much movement and with low volatility.  Bitcoin is currently trading for $9,737, which represents an increase of 0.54% on the day. Meanwhile, Ethereum gained 0.18% on the day, while XRP lost 0.78%.

The crypto market has spent the day without much movement and with low volatility.  Bitcoin is currently trading for $9,737, which represents an increase of 0.54% on the day. Meanwhile, Ethereum gained 0.18% on the day, while XRP lost 0.78%.

The crypto market has spent the day without much movement and with low volatility.  Bitcoin is currently trading for $9,737, which represents an increase of 0.54% on the day. Meanwhile, Ethereum gained 0.18% on the day, while XRP lost 0.78%.

Swiss Borg took the position of today’s biggest daily gainer, with gains of 18.23%. HedgeTrade lost 7.87% of its daily value, making it the most prominent daily loser.

Bitcoin’s dominance decreased since we last reported, with its value currently at 65.20%. This value represents a 0.92% difference to the downside when compared to yesterday’s value.

The cryptocurrency market capitalization increased slightly over the course of the day, with the market’s current value being $277.69 billion. This value represents an increase of $1.61 billion when compared to the value it had yesterday.

What happened in the past 24 hours

Crypto Ransomware Cartel?

Ransomware attacks started happening all over the world recently. They were performed by well-known cybercriminal groups, which are reportedly teaming up and creating cartel-style alliances, all with the idea to pressure their respective victims into paying the ransom requests.

The central feature to show that this is happening is that the gang notes that Ragnar Locker, which is a ransomware group, provided this info, as the title of the blog post they have posted says: “MAZE CARTEL Provided by Ragnar.”

_______________________________________________________________________

Technical analysis

_______________________________________________________________________

Bitcoin

The largest cryptocurrency by market capitalization has spent the day without much movement. As we noted yesterday, the $9,735 level was breached to the downside but was not confirmed (the lack of confirmation made us think that the move might be corrected soon). Bitcoin regained its price as well as the $9,375 level. There aren’t many opportunities for traders at the moment, but scalp traders might use the fact that Bitcoin is fluctuating around $9,735 and testing support and resistance levels above and below it.


Key levels to the upside                    Key levels to the downside

1: $9,870                                           1: $9,735

2: $10,010                                         2: $9,580

                                                           3: $9,250

Ethereum

Ethereum had no movement throughout the day, as it stayed within a one-dollar range. The second-largest cryptocurrency by market capitalization is secured by the 21-period moving average on its downside, while it has absolutely no volume to even try to test the upper levels.


Ethereum’s volume is extremely low while its RSI level is flat for a couple of days, sitting at 53.

Key levels to the upside                    Key levels to the downside

1: $251.4                                            1: $240

2: $260                                              2: $225.4

                                                           3: $217.6

Ripple

XRP slowly moved towards the $0.2 downside and tested the level after failing to break $0.205 due to the lack of volume. The third-largest cryptocurrency by market cap is in an inverse spot to Ethereum, as both the 21-period and 50-period moving averages are guarding the upside rather than the downside. XRP will require a substantial increase in volume in order to break this range. On top of that, unless it gets “pulled” up by Bitcoin or fundamentals, XRP is most likely to go under $0.2.


Key levels to the upside                    Key levels to the downside

1: $0.205                                           1: $0.2

2: $0.214                                           2: $0.19

 3: $0.227                                                        

 

Categories
Forex Market Analysis

Daily F.X. Analysis, June 10 – Top Trade Setups In Forex – US CPI and FOMC In Play! 

It’s going to be a busy day from the trading viewpoint as the U.S. CPI and FOMC will be the main highlight of the day. FED isn’t expected to cut the rates, but the CPI figures are expected to improve a bit, just like labor market figures. The dollar can stay stronger on sentiments until the actual data comes out.

It’s going to be a busy day from the trading viewpoint as the U.S. CPI and FOMC will be the main highlight of the day. FED isn’t expected to cut the rates, but the CPI figures are expected to improve a bit, just like labor market figures. The dollar can stay stronger on sentiments until the actual data comes out.

It’s going to be a busy day from the trading viewpoint as the U.S. CPI and FOMC will be the main highlight of the day. FED isn’t expected to cut the rates, but the CPI figures are expected to improve a bit, just like labor market figures. The dollar can stay stronger on sentiments until the actual data comes out.

Economic Events to Watch Today

 

 

 EUR/USD – Daily Analysis

The EUR/US is trading with a bullish bias below 1.1366 level. The price action of the EUR/USD pair remained flat throughout the Asian session. The President of the ECB (European Central Bank), Christine Lagarde, said that the central bank’s measure to fight the coronavirus crisis was proportionate to the severe risks facing its mandate. Lagarde said during a hearing at the Committee on economic and monetary affairs of the European Parliament, which was conducted via video conference that the crisis-related measures were temporary, targeted, and proportionate.

Besides, the ECB announced an additional 600 billion euros in its pandemic emergency purchase program (PEPP) and scaled up its previous 750 billion Euro, to extend the program till mid-2021. According to Lagarde, ECB continuously monitors the proportionality of its instruments, and she said that the net effects to be gained by PEPP expansion were overwhelmingly positive. The need for expansion was to avoid any deeper recession and quickening the pathway towards normalization.

When asked about the German court ruling of the ECB’s massive public sector purchase program, she said she was confident that a solution could be found because it was addressed to the German federal government and the German Parliament. On the data front, at 11:00 GMT, the German Industrial Production showed a decline of 17.9% in April against the expectations of 16% and weighed on shared currency euro. AT 13:30 GMT, the Sentix Investor Confidence from the Eurozone for June decline to 24.8 from the expected reduction of 22.0 and weighed on Euro.

The depressed Euro after inferior to expected German Industrial Production dragged the pair EUR/USD with itself to the low of 1.12680.

Meanwhile, Lagarde’s Speech explaining the benefits of ECB’s latest expansion in PEPP provided strength to Euro, which pushed the EUR/USD pair higher. For now, the eyes will remain on the U.S. CPI and FOMC data while the FED isn’t expected to change its policy rate, but the CPI can be a main driver in the market.  

Daily Support and Resistance

  • R3 1.1516
  • R2 1.1441
  • R1 1.1391

Pivot Point 1.1316

  • S1 1.1267
  • S2 1.1191
  • S3 1.1142

EUR/USD– Trading Tip

On Wednesday, the EUR/USD is consolidating in a narrow trading range of 1.1370 – 1.1276 level, and right now, it seems to break out of this trading range. On the lower side, the next target level seems to be 1.1185. Currently, the pair is facing immediate support around 1.1274 level, and closing of candles below this level may lead the EUR/USD prices further lower towards 1.1185 level, which is extended by the 50 EMA level. On the higher side, resistance holds at 1.1315 level today. Odds of bearish bias remains solid today.

GBP/USD – Daily Analysis

The GBP/USD continues to extend its 8-day winning streak and soars to 1.2766, the highest since March 12, 2020, mainly due to the broad-based U.S. dollar strength triggered by the geopolitical tensions between the Korean neighbors. Currently, the GBP/USD is holding at 1.2769 and consolidates in a new trading range of 1.2702 – 1.2815. However, the Brexit concerns remain on the card while showing no progress, which ultimately exerted some downside pressure on the British Pound and contributed to the currency pair declines.

It should be noted that the British retailers reported a sharp drop in annual sales last month, but less bad than April due to some COVID-19 restrictions eased, and more customers started online shopping.

At the data front, the British retail consortium May total sales -5.9% YoY vs. April -19.1% pct YoY, second-biggest fall since records began in 1995. The British retail consortium May like-for-like sales +7.9% YoY vs. April +5.7% YoY, excluding temporarily closed stores and including online sales. In the meantime, the Barclaycard U.K. may consider consumer spending -26.7% YoY vs. April -36.5% YoY.

However, the reason for limiting further losses in the currency pair could be attributed to the report that the United Kingdom and Japan are set to discuss the post-Brexit trade deal on the day which could underpin the cable pair.

At the USD front, the broad-based U.S. dollar recovered its previous session losses and drawing bids at press time as investors awaiting the next moves from the U.S. Federal Reserve ahead of its policy meeting. The U.S. dollar gains were further bolstered by the risk-off market sentiment triggered by the growth in geopolitical stresses between the Korean neighbors. However, the U.S. dollar’s bullish bias turned out to be one of the key factors that kept a lid on profits in the GBP/USD currency pair. Whereas, the U.S. Dollar Index that tracks the greenback against a basket of other currencies increased by 0.10% to 96.707 by 12:53 AM ET (5:53 AM GMT).

The U.S. 10-year Treasury yields fell 4-basis points (bps) to 0.844% while the stocks in Asia and the U.S. stock futures reported modest losses. The lack of significant data/events will urge the Cable traders to look for further details on risk catalysts for a fresh impetus. The UK-Japan trade talks and the US-China tension could offer hints and can help the greenback to gains further bullish traction.

Daily Support and Resistance

  • R3 1.2926
  • R2 1.2841
  • R1 1.2787

Pivot Point 1.2702

  • S1 1.2647
  • S2 1.2563
  • S3 1.2508

GBP/USD– Trading Tip

The bullish bias in the GBP/USD continues to dominate the market, and it’s leading the GBP/USD prices higher towards 1.2760 while the next resistance holds around 1.2816 level. Continuation of an upward trend can lead Sterling towards 1.2866 level while the support holds around 1.2707 level today. Below this, the prices can drop to 1.2638 level. On the 4 hour timeframe, the Cable has formed an upward channel that may keep the Sterling bullish today. Let’s look for buying over 1.2702 level today. 

USD/JPY – Daily Analysis

 The USD/JPY is trading dramatically bearish, falling from 107.900 level to 107.300. The USD/JPY remained strongly bearish throughout the Asian session, and it posted a steeper loss on Tuesday, followed by Mondays’ bearish trend amid the broad-based U.S. dollar weakness and improved Japanese economic outlook.

On the data front, at 4:50 GMT, the Bank Lending for the year from Japan increased to 4.8% in May from 2.9% in April. The Final GDP for the quarter decreased by 0.6% against the expected decline of 0.5% and weighed on Yen. 

At 4:52 GMT, the Current Account Balance for April came short of expectations of 0.33T as 0.25T and weighed on Japanese Yen. The Final GDP Price Index for the year came in line with the expectations if 0.9%. At 10:02 GMT, the Economy Watchers Sentiment, however, came in favor of Japanese Yen as 15.5 against the expected 12.6.

The preliminary reading of Japan’s Q1 GDP moved from -0.9% to -0.6% and came in better, which indicated the readiness of Japanese policymakers with extra stimulus if needed to fight against the pandemic.

Moreover, the better outlook of Japan’s current economic condition supported the Japanese Yen on Monday and weighed on the USD/JPY pair.

On the other hand, despite upbeat economic data from the U.S., the greenback lost its demand due to the drop in risk barometer that day. The rush of traders’ return from riskier assets weighed on the U.S. dollar and made it weak. 

Daily Support and Resistance    

  • R3 109.26
  • R2 108.91
  • R1 108.33
  • Pivot Point 107.97
  • S1 107.39
  • S2 107.03
  • S3 106.45

USD/JPY – Trading Tips

The USD/JPY is trading sharply bearish at 107.300 level, having violated the upward trendline at 107.600. Below this, the pair has a great potential to go for a 107.08 level, while a bearish breakout of 107.082 level can dip further until 106.770 level. On the 4 hour chart, the MACD, and RSI, both are holding in the selling zone, demonstrating that there’s further room for selling in the USD/JPY pair. Let’s consider taking selling trades below 107.97 today. Good luck! 

Categories
Forex Options

FX Options Market Combined Volume Expiries for 10th 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 10 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

– EUR/USD: EUR amounts

  • 1.1300 1.0b
  • 1.1390 714m

The EURUSD pair is in a consolidation period having strongly rejected a move below 1.1250 (position A) during yesterdays European and US session. Currently overbought on our one hour chart, but price is currently looking to test the resistance line at 1.1362. The 1.1390 maturity looks more likely, and especially if a candlestick can be formed above the 1.1362 level, which would confirm the resistance becoming a support line. US data and Eurozone policymaker speeches before the cut may affect price action.

– USD/JPY: USD amounts         

  • 106.90 530m  
  • 108.20 580m

The USDJPY pair is maintaining a bear trend with pullbacks, but is oversold on our one hour chart and price action is currently fading. 107.00 will act as a strong support barrier. Meanwhile, key support levels at 107.50 and 107.40 have both been breached and the bears remain in control.

– AUD/USD: AUD amounts

  • 0.6900 554m

The AUDUSD pair is in a wedge formation with the 0.7000 level acting as an area of resistance. If a candlestick can be formed above this key level, it will act to move the pair to the previous high at 0.7042 and beyond. The maturity at 0.69 looks to be 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 Assets

Analyzing The ‘ADA/USD’ Crypto-Fiat Asset Class

Introduction

Introduction

Introduction

Cardano is a decentralized platform allowing programmable transfers of value securely in a scalable fashion. It is the first blockchain created out from a scientific philosophy. It is also the first research-driven cryptocurrency that is built on the Haskell programming language.

Cardano is traded with the ticker ADA. It has a market capitalization of $2.2 billion. It can be bought, sold, and exchanged in several cryptocurrency exchanges. Apart from USD, it can be traded against other cryptos such as BTC, ETH, USDT, etc.

Understanding ADA/USD

The price of ADA/USD depicts the value of the US Dollar equivalent to one Cardano. It is quoted as 1 ADA per X USD. For example, if the market price of ADA/USD is 0.086112, then each ADA will be worth 0.086112 US dollars.

ADA/USD specifications

Forex brokers allow trading of only a few popular cryptocurrencies like Bitcoin, Ethereum, Ripple, etc. The other cryptos must be traded via cryptocurrency exchanges. And the working of these exchanges is different from that of forex brokers. As a major difference, cryptos are not traded in lots, in cryptocurrency exchanges.

Spread

Spread is the difference between the buying and selling price of the cryptocurrency. Crypto exchanges match these prices between induvial traders. Thus, there is no fixed spread. Also, typically, the spread is negligible in trading cryptos.

Fee

There are different fees charged by cryptocurrency exchanges for trading any coin. The various forms of fees include

  • Execution fee (Taker or Maker)
  • 30-day trading volume fee
  • Margin opening fee, if applicable

Note that the taker or maker fee will be considered for opening as well as closing the trade, and will depend on the value being traded.

Example

  • Short 10,000 ADA/USD at $0.085800
  • 30-day volume fee is $0
  • Order is executed as Taker

Total cost of the order = 10000 x $0.085800 = $858

Assuming the taker fee to be 0.26%, the opening fee will be – $858 x 0.26% = $2.23

Assuming the trade is opened with leverage, and the margin opening fee is 0.02%, the fee is calculated as – $858 x 0.02% = $0.17

If the order is closed at $0.095800, the total cost of closing will be 10,000 x $0.095800 = $958. And the fee for the same obtained is – $958 x 0.26% = $2.5

Thus, the total fee for the opening, maintaining and closing the trade would be equal to – $2.24 + $0.17 + $2.5 = $4.91

Trading Range in ADA/USD

The trading range represents the number of units moved in the pair in a specified time frame. For example, if 10,000 ADA/USD is traded and the average unit movement in the 1H time frame is 0.000778, then it means the pair will yield 10,000 x 0.000778 = $7.78.

Note: the above values are for trading 10,000 units of ADA/USD. If X units are traded, then the ATR values will be,

(Above ATR value / 10,000) x X units

Procedure to assess ATR values

  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.

ADA/USD Cost as a Percent of the Trading Range

The following tables depict the variations in total cost in terms of percentage based on the change in volatility and time frame.

Taker Execution Model

Opening = $2.23 | Margin fee = $0.17 | Closing = $2.5

Total fee = Opening + Margin fee + Closing = $2.24 + $0.17 + $2.5 = $4.91

Maker Execution Model

Opening = $1.37* | Margin fee = $0.17 | Closing = $1.53*

Total fee = Opening + Margin fee + Closing = $1.37 + $0.17 + $1.53 = $3.07

*Assuming maker fee to be 0.16% the trade value.

Trading the ADA/USD

Cardano stands 10th in CoinMarketCap in terms of market capitalization. Thus, making it a tradable pair in the crypto market. Almost all forex brokers do not ADA enabled for trading, so it must be traded through cryptocurrency exchanges. The fee structure here is quite different from forex brokers. However, the overall fee is more or less the same.

Comprehending the above tables, the magnitude of the percentage depicts how expensive/cheap a trade will be relative to the time frame and profit/loss. Let us understand this with an example.

The average values in 4H and 1D are 26.65% and 9.73%, respectively. The percentage in the 4H time frame is greater than the percentage in the 1D time frame. This means that the total cost for both is the same ($4.91), but relative to the generated profit, it is higher in the 4H time frame. A detailed reason for this can be given from the trading range table.

In the trading range table, the corresponding values are $11.52 and $31.55. This can be interpreted as, an average of $11.52 will be generated in trading the 4H time frame, and $31.55 when trading the 1D time frame. The fee in both cases is the same. Thus, we infer that the fee that is paid to generate $31.55, the same fee is deducted for generating $11.52. And hence, this is exactly what the higher percentage value depicts.

Reading through the row, the percentage values for a time frame is highest in the minimum column and least in the maximum column. So, if you’re are able to deal with higher volatility, it is ideal to trade when the volatility is around the average or maximum values. And if you cannot deal with the high volatility, you may trade the higher time frames to reduce the relative costs.

Categories
Forex Daily Topic Forex Fundamental Analysis

Everything About ‘Exports’ & The Impact Of Its News Release On The Forex Market

Introduction

Introduction

Introduction

Exports make one half of a country’s International Trade Balance. In today’s modern economy, with many countries pursuing their economic growth through the main focus on their exports, we must understand Export and its implications on the domestic as well as the global economy. The big words that are thrown around in the media like “Currency Wars,” “Trade Wars,” etc. all revolve around the exports among countries. A thorough understanding of the International Trade and Balance of Payments of countries can help us gauge economic growth on a macroeconomic level very well.

What is Exports?

The sale of locally produced goods to foreign countries is called Exports. Goods and Services produced in one country only when sold to other countries it is called an Export. Countries generally export goods and services that they have a competitive advantage over other countries. For example, Germans export Cars, America export Capital Goods, China export electronic goods, Jamaica exports Coffee, etc.

The advent of Globalization led to an increase in international trade opening doors for domestic industries to tap into the global market. The journey has not been smooth, during the Great Depression, and the following World War II slowed down international trade where many countries closed off their doors to foreign goods as part of protectionist strategies.

Before the 1970s, countries were following an import substitution strategy for growth where countries believed in self-sustenance by producing their goods and services without relying on foreign countries. After the 1970s, the countries began to realize the failure of import substitution and started opting for Export-led growth strategy, and that has been the case to date.

In general, a trade surplus, i.e., a country’s exports, exceeds its imports, is good for the economy. Although, it may not always be necessary as countries may import more than their current exports to build future and long term projects that will assist them in their economic prospects in the long run. In today’s world, China, the United States, Germany, Japan, and the Netherlands are the biggest exporters in the world in terms of revenue.

How can the Exports numbers be used for analysis?

Exports are crucial for today’s modern economies because of the many-fold that it brings with it to the exporting country. The following are the benefits and impacts of exports on the economy:

Broader Market – Companies always want to sell more and increase their profits. By exposing them to a broader range of audience gives them a much better chance of making profits than with a limited audience. By tapping into foreign markets, the domestic companies have to evolve to meet the local demands of other nations and learn how to mix what they sell and what is required by the world well. All this makes the companies grow more robust and overall increases their size and revenue a lot faster than what they would have achieved through operating domestically.

Wealth – Exports increase demand and, consequently, profits. It ultimately leads to employment, increases in wages, and ultimately raises the standard of living. Governments actively promote and encourage exports by reducing tariffs and use protectionist strategies like import barriers to protect their domestic business.

Foreign Reserves – As the trade happens between two countries with different currency regimes, where the payment can be in the domestic or foreign currency, this increases the Central Bank’s currency reserves. With sufficient currency reserves, the Government can manipulate exchange rates to control inflation and deflation by increasing or decreasing currency volume in the global market whenever needed.  During times of substantial exports, countries intentionally peg their currency value lower to make their products appear cheaper and increase the returns on their exports. China has been accused of this low pegging their currency in their favor. Subsequently, other countries have retaliated by lowering their currencies as well. It is what is being called “Currency Wars.”

Trade Surplus – It is always better to be owed money than to owe money as an individual. The same, in general, applies to countries that want to be net creditors to the world than net debitors. Increasing trade deficits can pile up the country’s debt, which can multiply over the years and can be very difficult to overcome. A healthy level of exports, in general, brings more money into the country and keeps the economy going at a steady and healthy growth rate.

Impact on Currency

Today’s global currency markets are free-floating and self-adjusting. Any sudden surge in exports will be followed by a rise in the currency value to compensate for the increased demand on the global market for its currency. A decline in exports will be followed by decreased demand for the currency, and accordingly, the currency depreciates.

Although the market forces are self-adjusting, frequent Government interventions to speed up the correction process to keep the output of the business constant is common.

Economic Reports

Exports form part of a country’s Trade Balance, which is reported under the Current Account Section of the International Balance of Payments Report of the country. The Balance of Payments reports is released quarterly and annually for most countries. The Trade Balance reports are published every month, which consists of Exports and Imports figures.

For the United States, the Bureau of Economic Analysis publishes the monthly Trade Balance reports on their website in the 1st week of every month for the previous month.

Sources of Exports

Impact of the ‘Exports’ news release on the price charts

In the previous section of the article, we understood the importance of Exports in an economy and saw how it contributes to the growth of the country. Exports are nothing but goods and services that are sent to the rest of the world, including merchandise, transportation, tourism, communication, and financial services. A nation that has positive net exports experiences a trade surplus, while a negative net exports mean the nation has a trade deficit. Net exports may also be called the balance of trade. Economists believe that having a consistent trade deficit harms a nation’s economy, creating pressure on the nation’s currency and forcing lowering of interest rates.

In today’s lesson, we shall analyze the impact of Exports data on different currencies pairs and observe the change in volatility due to the news release. A higher than expected number should be taken as positive for the currency, while a lower than expected number as negative. The below image shows the total Exports of Australia during the month of March and April. It is evident that there was an increase in Exports in the current month by 20%. Let us look at the reaction of the market to this data.

AUD/USD | Before the announcement:

We shall begin with the AUD/USD currency pair to witness the impact of Exports on the Australian dollar. The above image shows the state of the chart before the news announcement, where we see that the market is in a downtrend, and recently the price has displayed a reversal pattern indicating a possible reversal to the upside. Based on the Exports data, we will look to position ourselves in the currency.

AUD/USD | After the announcement:

After the news announcement, the market moves higher and volatility increases to the upside. The sudden rise in the price is a result of the extremely positive Exports data where there was a rise in the value by 20% compared to the previous month. This brought cheer in the market, making traders to ‘buy’ Australian dollars and thus, strengthening the currency. One can go ‘long’ in the market after the news release with a stop loss below the recent ‘low.’

AUD/NZD | Before the announcement:

AUD/NZD | After the announcement:

The above images are that of AUD/NZD currency pair, where we see that the market is in a downtrend that began just a few hours ago, and recently the price has shown sharp reversal from its recent ‘low.’ Technically this is an ideal reversal pattern that signals a reversal of the trend. One can take a risk-free ‘long’ position if the news announcement does not change the dynamics of the chart.

After the news announcement, the price sharply rises and closes, forming a strong bullish candle. As the Exports were exceedingly high, traders bought Australian dollars and increased the volatility to the upside. This could be a confirmation sign of the trend reversal, where we can expect the market to move much higher.

EUR/AUD | Before the announcement:

EUR/AUD | After the announcement:

The above images represent the EUR/AUD currency pair, where the first image shows the state of the chart before the news announcement. From the chart, it is clear that the overall trend of the market is up, but recently the price has shown a strong reversal pattern to the downside. Looking at the price action, we will prefer taking a ‘sell’ trade depending on the impact of the news release.

After the news announcement, the price falls lower, with an increase in volatility to the downside. The bearish ‘news candle’ is a consequence of the upbeat Exports data, which came out to be exceptionally well for the economy. Since the Australian dollar is on the right-hand side of the pair, traders sold the currency pair in order to strengthen the Australian dollar. This is a perfect ‘sell’ for all.

That’s about ‘Exports’ 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 9 – Top Trade Setups In Forex – European GDP in Highlights! 

On the news front, the Eurozone is due to release series of high impact events that may drive movements in the Euro related currency pairs. The events like trade balance, GDP, and final employment change will be in the highlights.

On the news front, the Eurozone is due to release series of high impact events that may drive movements in the Euro related currency pairs. The events like trade balance, GDP, and final employment change will be in the highlights.

On the news front, the Eurozone is due to release series of high impact events that may drive movements in the Euro related currency pairs. The events like trade balance, GDP, and final employment change will be in the highlights.

Economic Events to Watch Today

 

 

EUR/USD – Daily Analysis

The EUR/US prices were closed at 1.12937 after placing a high of 1.3196 and a low of 1.12680. Overall the movement of the EUR/USD pair remained flat throughout the day.

On Monday, the President of the European Central Bank, Christine Lagarde, said that the central bank’s measure to fight the coronavirus crisis was proportionate to the severe risks facing its mandate.

Lagarde said during a hearing at the Committee on economic and monetary affairs of the European Parliament, which was conducted via video conference, that the crisis-related measures were temporary, targeted, and proportionate.

On Thursday in its monetary policy decision, ECB announced an additional 600 billion euros in its pandemic emergency purchase program (PEPP) and scaled up its previous 750 billion Euro, to extend the program till mid-2021.

According to Lagarde, ECB continuously monitors the proportionality of its instruments, and she said that the net effects to be gained by PEPP expansion were overwhelmingly positive. The need for expansion was to avoid any deeper recession and quickening the pathway towards normalization.

When asked about the German court ruling of the ECB’s massive public sector purchase program, she said she was confident that a solution could be found because it was addressed to the German federal government and the German Parliament.

On the data front, at 11:00 GMT, the German Industrial Production showed a decline of 17.9% in April against the expectations of 16% and weighed on shared currency euro. AT 13:30 GMT, the Sentix Investor Confidence from the Eurozone for June decline to 24.8 from the expected reduction of 22.0 and weighed on Euro.

The depressed Euro after inferior to expected German Industrial Production dragged the pair EUR/USD with itself to the low of 1.12680.

Meanwhile, Lagarde’s Speech explaining the benefits of ECB’s latest expansion in PEPP provided strength to Euro, which pushed the EUR/USD pair higher.

Lagarde’s Speech and economic data from Eurozone moved in the opposite direction, and hence, the pair EUR/USD remained flat throughout the day as it closed at the same level it was started with. No data was to be released from the American side, so the pair followed Euro’s directions.

Daily Support and Resistance

  • R3 1.1357
  • R2 1.1338
  • R1 1.1327

Pivot Point 1.1308

  • S1 1.1296
  • S2 1.1278
  • S3 1.1266

EUR/USD– Trading Tip

The EUR/USD is consolidating in a narrow trading range of 1.1370 – 1.1276 level, and right now, it seems to break out of this trading range. On the lower side, the next target level seems to be 1.1185. Currently, the pair is facing immediate support around 1.1274 level, and closing of candles below this level may lead the EUR/USD prices further lower towards 1.1185 level, which is extended by the 50 EMA level. On the higher side, resistance holds at 1.1315 level today. Odds of bearish bias remains solid today.

GBP/USD – Daily Analysis

The GBP/USD pair was closed at 1.27235 after placing a high of 1.27358 and a low of 1.26278. Overall the movement of GBP/USD remained bullish throughout the day. The broad-based U.S. dollar selling bias after the positive tone around greenback followed by Friday’s job report vanished pushed the pair GBP/USD higher on Monday. The currency pair GBP/USD raised for the 8th consecutive day on Monday and continued its bullish rally.

The weakness of the U.S. dollar was attributed to weak U.S. yields. The U.S. dollar index (DXY) turned negative on the day and fell back to below 97.00 level. The U.S. stock was high on the back of increased risk appetite.

On the other hand, the E.U. chief negotiator, Michel Barnier, was supposed to present a compromise proposal on access to British waters during the latest round of talks, but at the last minute, he was blocked to present the proposal by its member states with large fishing communities.

E.U. now expects the talks to drag into October, but the U.K. has ruled it out and said that it was unacceptable. E.U. wanted to intensify and accelerate its work to make progress with the negotiations, and the U.K. need to prepare its businesses for a new trading environment.

On the fishing issue, the E.U. wants the U.K. to follow the structures of standard fisheries policy (CFP) from the end of 2020. But British fishing communities claim that the policy left the U.K. with far too few fish to catch, so they want to be an independent coastal state from the end of 2020. On the data front, there was no macroeconomic data to be released from both sides so, the pair continued following its previous day’s trend and posted gains on the back of the risk-on market sentiment.

Daily Support and Resistance

  • R3 1.28
  • R2 1.2765
  • R1 1.2742

Pivot Point 1.2707

  • S1 1.2684
  • S2 1.2649
  • S3 1.2627

GBP/USD– Trading Tip

The GBP/USD’s overall trend is bullish as the pair continues to reach 1.2690 levels, having violated the triple top level on the 4-hour timeframe. The pair is retracing a bit; perhaps, investors are doing some profit-taking before taking any additional buying position in Sterling. Bullish trend continuation leads to GBP/USD prices towards the next resistance level of 1.2760 level. Above this, the next resistance holds around 1.2795 level. Conversely, the support is likely to be found around 1.2665 and 1.2601 level today. Let’s look for selling below 1.2707 and buying above this level today. 

USD/JPY – Daily Analysis

 The USD/JPY pair was closed at 108.426 after placing a high of 109.691 and a low of 108.232. Overall the movement of the USD/JPY pair remained strongly bearish throughout the day. The pair USD/JPY posted a steeper loss on Monday amid the broad-based U.S. dollar weakness and improved Japanese economic outlook. The pair dropped on Monday after posting gains for the previous four consecutive days.

On the data front, at 4:50 GMT, the Bank Lending for the year from Japan increased to 4.8% in May from 2.9% in April. The Final GDP for the quarter decreased by 0.6% against the expected decline of 0.5% and weighed on Yen. At 4:52 GMT, the Current Account Balance for April came short of expectations of 0.33T as 0.25T and weighed on Japanese Yen. The Final GDP Price Index for the year came in line with the expectations if 0.9%. At 10:02 GMT, the Economy Watchers Sentiment, however, came in favor of Japanese Yen as 15.5 against the expected 12.6.

The preliminary reading of Japan’s Q1 GDP moved from -0.9% to -0.6% and came in better, which indicated the readiness of Japanese policymakers with extra stimulus if needed to fight against the pandemic.

Moreover, the better outlook of Japan’s current economic condition supported the Japanese Yen on Monday and weighed on the USD/JPY pair.

On the other hand, despite upbeat economic data from the U.S., the greenback lost its demand due to the drop in risk barometer that day. The rush of traders’ return from riskier assets weighed on the U.S. dollar and made it weak. 

Daily Support and Resistance    

  • R3 110.81
  • R2 110.25
  • R1 109.34

Pivot Point 108.79

  • S1 107.88
  • S2 107.33
  • S3 106.42

USD/JPY – Trading Tips

The USD/JPY fell dramatically to violate the narrow trading range of 109.800 – 109.255, and now it’s trading somewhere around 107.900. On the 4 hour timeframe, the USD/JPY is likely to find support at 107.900, and below this, the upward trendline may extend support around 107.600 level. The Japanese currency pair has already crossed below 50 EMA, favoring selling bias in the pair today. Let’s consider taking selling trades below 108.50 today. Good luck! 

Categories
Forex Options

FX Options Market Combined Volume Expiries for 9th 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 9 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

– EUR/USD: EUR amounts

  • 1.1300 802m

The EURUSD pair is in a sideways consolidation channel and oversold on our one hour chart. However, the support line is currently being tested and it looks like the bull traders are about to throw the towel in on the 1.1300 key level where our option maturity is today. Important Eurozone data including unemployment and GDP will be an acid test for the Euro and is due out soon.

– USD/JPY: USD amounts         

  • 107.85 390m

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.

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

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 09 – Bitcoin Gaining 700% Soon? Analyst Estimates BTC At $75,000

The crypto market has spent the day mostly with low volatility, except for the past few hours when the price bounced up and down quickly before returning to its original values.  Bitcoin is currently trading for $9,700, which represents a decrease of 0.56% on the day. Meanwhile, Ethereum lost 0.04% on the day, while XRP gained 0.16%.

The crypto market has spent the day mostly with low volatility, except for the past few hours when the price bounced up and down quickly before returning to its original values.  Bitcoin is currently trading for $9,700, which represents a decrease of 0.56% on the day. Meanwhile, Ethereum lost 0.04% on the day, while XRP gained 0.16%.

The crypto market has spent the day mostly with low volatility, except for the past few hours when the price bounced up and down quickly before returning to its original values.  Bitcoin is currently trading for $9,700, which represents a decrease of 0.56% on the day. Meanwhile, Ethereum lost 0.04% on the day, while XRP gained 0.16%.

Kyber Network took the position of today’s biggest daily gainer, with gains of 9.7%. Divi lost 23.7% of its daily value, making it the most prominent daily loser.

Bitcoin’s dominance increased slightly since we last reported, with its value currently at 66.12%. This value represents a 0.87% difference to the upside when compared to yesterday’s value.

The cryptocurrency market capitalization decreased slightly over the weekend, with the market’s current value being $276.08 billion. This value represents a decrease of $0.24 billion when compared to the value it had yesterday.

What happened in the past 24 hours

Bitcoin soon at $75,000?

Bitcoin analysis from Timothy Peterson (Cane Island Alternative Advisor) shows a strong possibility of BTC going to $75,000. The analysis is based on finding an uncanny similarity to Bitcoin’s chart movement in 2013. Peterson called this similarity “almost perfect.”

Peterson tracked Bitcoin’s price recovery from its 3,600 lows from mid-March, which (as he noted) looks almost exactly like the price action from seven years ago. If the price action from seven years ago can be translated into the future, Bitcoin should move 700% to the upside, giving it a price of around $75,000.

_______________________________________________________________________

Technical analysis

_______________________________________________________________________

Bitcoin

The largest cryptocurrency by market capitalization has spent the day mostly without any large price fluctuations. The market has been slow except for one single candle which tried to break both the upside and downside key levels but failing to do either completely.


Bitcoin’s volume is on the same levels as over the past week, while its RSI level fell to 50. The key level of $9,735 will be moved to the “upside” once the break is confirmed.

Key levels to the upside                    Key levels to the downside

1: $9,870                                           1: $9,735

2: $10,010                                         2: $9,580

                                                           3: $9,250

Ethereum

Ethereum had quite a slow day as well, with its price making a move only in a recent couple of candles. While one candle was strictly bullish, the other one had large wicks to both the upside and downside. The 21-period moving average seems to be holding the price quite well.


Ethereum’s volume increased in the past few candles, while its RSI level came down to 54.

Key levels to the upside                    Key levels to the downside

1: $251.4                                            1: $240

2: $260                                              2: $225.4

                                                           3: $217.6

Ripple

XRP made a move towards the upside and spent the whole day trying to break the $0.205 resistance level. However, the move was unsuccessful, triggering a severe drop, which even broke the $0.2 support level for a few minutes. However, the bulls came back almost instantly and picked up where they left off, threatening the $0.205 resistance level once again.


A break above $0.205 with an increase in volume (or a confirmation of breaking $0.205) could be a good trading opportunity for scalp traders.

Key levels to the upside                    Key levels to the downside

1: $0.205                                           1: $0.2

2: $0.214                                           2: $0.19

 3: $0.227                                                        

 

Categories
Forex Price Action

Some to Take and Some to Skip

In today’s lesson, we are going to demonstrate an example of an H4 chart, which seems to be offering several entries. However, a trader has to be very calculative before taking an entry. Some entries are there to be taken, and some are there not to be taken. We would try to find out why we shall skip taking some entries. Let us get started.

In today’s lesson, we are going to demonstrate an example of an H4 chart, which seems to be offering several entries. However, a trader has to be very calculative before taking an entry. Some entries are there to be taken, and some are there not to be taken. We would try to find out why we shall skip taking some entries. Let us get started.

In today’s lesson, we are going to demonstrate an example of an H4 chart, which seems to be offering several entries. However, a trader has to be very calculative before taking an entry. Some entries are there to be taken, and some are there not to be taken. We would try to find out why we shall skip taking some entries. Let us get started.

This is an H4 chart. The chart shows that the price makes a strong bullish move and consolidates for a long time. The last candle comes out as a bullish candle breaching consolidation resistance. It usually a scenario of taking a long entry. Before taking an entry, we must calculate whether the price consolidates for more than a day or not. Over here, the price consolidates more than a day. It means the level of resistance becomes daily resistance. The breakout is not for the H4-daily combination traders to trigger a long entry.

The chart shows that the price heads towards the North. The buyers may wait for the price to consolidate and get a bullish reversal candle to go long in the pair. They must keep their eyes on the pair.

The chart produces a bearish inside bar. It may consolidate more and make a deeper consolidation. This is what the buyers are to hope for. Let us find out what the price does here.

The chart shows that the price consolidates for five candles altogether. The last bullish candle is the last H4 candle of that day. It means if the chart produces the next candle as a bullish engulfing candle, the buyers will have an opportunity to go long in the pair. Otherwise, they are to wait longer.

The last candle comes out as a bullish engulfing candle breaching consolidation resistance. The buyers may trigger a long entry right after the last candle closes by setting stop loss below consolidation support and by setting take profit with 1R.

The price consolidates again and produces a bullish engulfing candle. It seems the bull is going to dominate in the pair for a long time since it finds another level of support. When price trends like that, traders add more positions, and the price keeps trending relatively for a longer time.

Here it is. The price hits the target of 1R. They buyers grab some green pips. Yes, they wait for the price to hit the target. Some traders may take a partial profit out of it and let the rest of the trade run to grab more pips.

In this lesson, we have demonstrated that traders may take the second entry and skip the first one because of the daily resistance factor. Traders must calculate these things before taking entry.

Categories
Forex Fundamental Analysis

The Importance Of ‘Government Revenue’ As An Economic Indicator

Introduction

Introduction

Introduction

Government Revenue is one half of the Government Budget that will shape the economic growth for the fiscal year. It is closely watched statistic by traders and investors to analyze the policy maker’s behavioral trends, actions, and corresponding economic consequences for the current fiscal year.

What is Government Revenue?

Government revenue is the money received from tax receipts and other non-tax sources by a government that allows the Government to maintain the economy, finance its functions, and undertake government expenditures. The Federal Government receives income through a variety of sources which are as follows:

Taxes

Taxes are the most important source of Government revenue, with various forms of tax income coming to the Government. The personal individual income tax makes a significant part of the tax revenue of the Government. Other forms of tax like business or corporate tax, consumption tax, value-added land tax, tax on city maintenance and constructions, enterprise income tax, resource tax, etc. are other forms in which the Government collects taxes. Taxes are a compulsory payment from the consumers and businesses of the economy without any quid pro quo (i.e., getting nothing in return for tax payments from the Government).

Rates or Rental Incomes

These refer to local taxations. The rates are usually proportional to the rentable value of a business or domestic properties. It can take the form of Government-owned lands and buildings leased out for businesses or organizations.

Fees

These are the income the Government receives for its services. These could include services like public schools, insurance, etc.

License Fees

These are the payments received for authorizing permission or privilege. For example, issuing a building permit, or driving license, etc.

Public Sector Surplus

Revenue generated through sales of goods and services like water connection, electricity, postal services, etc.

Fines and Penalties

This is not intended to generate revenue but to make the public adhere to the law. Examples would include parking tickets or speeding tickets.

Gifts

These are the donations received from non-government members of the country and form a small portion of the Government’s revenue. These are usually received to help the Government during wars or emergencies.

Borrowing

This is the least preferred way to raise capital. The Government can borrow from investors in the form of bonds to finance its operations, and this method, although prevalent, is not preferable.

Below is a snapshot of the Federal Government’s Revenue from various sources:

(Picture Source – Fiscal Treasury)

How can the Government Revenues numbers be used for analysis?

The amount the Government receives in revenues determines how much it can spend. The revenue generated is directly correlated to the GDP. The GDP is directly influenced by how much the Government spends on the economy to spur growth. Both are linked in a feedback loop. By effectively drafting out the Federal Policy for a fiscal year, the Government can increase or decrease their tax revenues.

When the Government increases tax revenues, it may receive more than its fiscal expenditures, but that would burden the consumers and business. When taxes are increased, it leaves less money for people to spend, and people prefer to save than invest. It slows down the economy, and correspondingly a deflationary environment begins to start, and the economy risks going into a stagnation or worse a recession. During these times, the GDP will fall, and correspondingly the next fiscal year’s revenue would decline.

When the Government cuts back on taxes levied, the revenue decreases for the Government, but consumers and businesses would have more disposable income on their hand, which would encourage spending and thus stimulating the economy. It would keep the GDP growth positive and maintain a reasonable inflation rate. Consequently, this leaves little room for Government expenditures. When the expenditure is low, the stimulus is low, which results in a slowdown in the economic activity in the next business cycle.

Hence, Government Revenue and Government Expenditure both are two levers that have to be carefully adjusted to achieve an optimal balance for the healthy functioning of the economy. Too much spending with little revenue results in deficits that piles up debt burden in the long run. Too much revenue with little spending slows down the economy.

In recent times, most of the developed economies’ Governments have been failing to maintain steady growth without low tax and increased spending that has resulted in substantial deficits for the Government. Hence, monitoring Government revenue and its corresponding expenditures in the fiscal policy has become essential for traders and investors in the recent times, as the deficits increase Sovereign Credit Risk (defaulting on debt), or threaten the economy into a recession.

Impact on Currency

In an ideal situation, where a Government has zero debt and has a balanced budget (taxes and spending equal) would contribute to a steady and stable economy. An increase in tax revenues would indicate high GDP prints indicating a growing economy.

But in the real world, most of the Governments are debt-ridden, and an increase in tax revenues means the burden on the citizens and businesses,  which deflates the economy as it takes money out of the economy the currency appreciates and vice versa. Hence, Government revenue is a proportional indicator where decreased revenue deflates the economy and currency appreciate in the short-run (for the fiscal year) and vice versa.

More importantly, Government Revenue is half of the equation, what the Government spends on is the second half. It is, therefore, beneficial to keep both figures in consideration to assess economic growth in the near term.

Economic Reports

For the United States, the Treasury Department releases monthly and annual reports on its official website. The treasury statements detailing the Fiscal Policy containing Government revenue and expenditures are released at 2:00 PM on the 8th business day every month. The World Bank also maintains the annual Government Revenue and Spending data on its official website, which is easily accessible.

Sources of Government Revenues

United States Monthly Fiscal Policy statements can be found below.

Monthly Treasury Statement – United States & Government Revenue as a percent of GDP

We can find Government Revenues for the OECD countries below.

Government Revenues – OECD & World Bank – Government Revenue data

We can find the monthly Government Revenue statistics of world countries here –

Trading Economics – Government Revenues

Impact of the ‘Government Revenues’ news release on the price charts

After getting a clear understanding of the Government Revenue economic indicator, we will now extend our discussion and find the impact it makes on various currency pairs. The revenue of a government is used for multiple reasons, that directly or indirectly facilitates the growth of the country. Revenue is basically the amount of money that is brought into the Government’s kitty through various activities.

These revenues are received from taxation, fees, fines, inter-government grants or transfers, security sales, resource rights, as well as any other sales that are made. However, investors believe that the data does not have a major impact on the currency and is not of great value when it comes to fundamental analysis.

Today, we will be analyzing the impact of Government Revenue data of Brazil on the Brazilian Real. We can see in the snapshot below that the Brazilian Government received less revenue in the month of March compared to its previous month. A higher than expected reading should be taken as positive for the currency while a lower than expected reading is taken as negative. Let us find out the reaction of the market.

Note: The Brazilian Real is an illiquid currency, and hence there will be lesser price movement on charts. 

USD/BRL | Before the announcement:

We shall start with the USD/BRL currency pair to examine the change in volatility due to the announcement. The above image shows the characteristics of the chart before the news announcement, where we see that the market is in a strong uptrend with gap ups every subsequent day. This means the Brazilian Real is extremely weak, and there is no price retracement until now. Technically, we will be looking to buy this currency pair after the price retraces to a key ‘support’ or ‘demand’ level.

USD/BRL | After the announcement:

After the news announcement, the market moves higher and volatility expands on the upside. The Brazilian Real weakened further as a result of weak Government Revenues data where there was a reduction in net revenues for the current month. Traders bought U.S. dollars after the news release, which took the price much higher. The bullish ‘news candle’ is an indication of the continuation of the trend, but still, we need to wait for a retracement to enter the market.

EUR/BRL | Before the announcement:

EUR/BRL | After the announcement:

The above images represent the EUR/BRL currency pair that shows the state of the chart before and after the announcement. In the first image, it is clear that the market is again in a strong uptrend, and the price has recently broken out of the ‘range.’ Since the market is violently moving up, we should wait for the price to pull back near a ‘support’ area so that we can join the trend. We should never be chasing the market.

After the news announcement, the market reacts positively to the news data, and the price closes as a bullish candle. The increase in the volatility to the upside is a consequence of the poor Government Revenue data, where the Government collected lesser revenue in that month. The news release has a fair amount of impact on the pair that essentially weakened the currency further.

BRL/JPY | Before the announcement:

BRL/JPY | After the announcement:

The above images are that of the BRL/JPY currency pair, where we see that the market is a strong downtrend before the news announcement and is currently at its lowest point. Since the Brazilian Real is on the left-hand side of the pair, a down-trending market signifies a great amount of weakness in the currency. We need to wait for the price retracement to a ‘resistance’ area so we can take a ‘short’ trade.

After the news announcement, the volatility expands on the downside, and the market moves further down. The ‘news candle’ closes with signs of bearishness, and later too, the price continues to move lower. This was the impact of the news on this pair. We should wait for the price to retrace to join the downtrend.

That’s about ‘Government Revenues’ 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 8 – Top Trade Setups In Forex – Dollar Strengthens Over NFP! 

On the news front, the eyes will remain on the German Industrial Production m/m and ECB President Lagarde Speaks. Both of these may have an impact on the Euro related currency pairs.

On the news front, the eyes will remain on the German Industrial Production m/m and ECB President Lagarde Speaks. Both of these may have an impact on the Euro related currency pairs.

On the news front, the eyes will remain on the German Industrial Production m/m and ECB President Lagarde Speaks. Both of these may have an impact on the Euro related currency pairs.

Economic Events to Watch Today

 

 

EUR/USD – Daily Analysis

The EUR/USD pair was closed at 1.12911 after placing a high of 1.13835 and a low of 1.12781. Overall the movement of EUR/USD remained bearish throughout the day. The EUR/USD pair rose to 1.13835 near 13-weeks highest level but failed to remain there and broke its nine days bullish streak and fell on Friday amid U.S. dollar strength across the board after the release of US Non-Farm Employment Change.

The pair EUR/USD was on bullish track after the announcement of an additional 600 billion euros in the emergency package from the European Central Bank on Thursday. The package was announced to cover up the losses faced after the coronavirus induced lockdowns across the globe and its impact on the global economy.

The additional 600 billion euros by ECB in its pandemic emergency purchase program (PEPP) made the total size of aid provided after the coronavirus crisis to 1.35 trillion euros. ECB also said that the updated forecast about GDP showed a contraction of 8.7% this year, and the inflation expectations were to rise by 0.3% this year and 0.8% in next year. EUR/USD moved in an upward direction after the ECB’s PEPP announcement and continued to follow the trend in early sessions on Friday and rose above 13-weeks higher level.

However, after the release of US Non-Farm Employment Change, the pair EUR/USD started to move in the opposite direction at the ending day of the week. At 17:30 GMT, the Non-Farm Employment Change from the United States showed that 2.509M people were hired in May against 7.750M of job loss expectations. A stronger than expected job report from the U.S. gave strength to the U.S. dollar across the board and weighed on EUR/SD pair.

Adding in the strength on the U.S. dollar was the Unemployment Rate, which came in as 13.3% against the expectations of 19.4% and further dragged down the pair EUR/USD pair.

On the other hand, from the Europe side, at 11:00 GMT, the German Factory Orders for April were also released which showed that factory orders were reduced by 25.8% in April against the expected drop of 20% and weighed on Euro which ultimately dragged the pair in a downward trend.

Daily Support and Resistance

  • R3 1.1357
  • R2 1.1338
  • R1 1.1327

Pivot Point 1.1308

  • S1 1.1296
  • S2 1.1278
  • S3 1.1266

EUR/USD– Trading Tip

The EUR/USD is also following a bearish trend on the back of a stronger dollar. Currently, the pair is facing immediate support around 1.1284 level, and closing of candles below this level may lead the EUR/USD prices further lower towards 1.1244 level, the support, which is extended by the 50 EMA level. On the higher side, resistance holds at 1.1315 level today. Odds of bearish bias remains solid today.

GBP/USD – Daily Analysis

The GBP/USD was closed at 1.26689 after placing a high of 1.26901 and a low of 1.25828. Overall the movement of GBP/USD pair remained bullish throughout the day. The pound rose for 7th consecutive day on Friday amid the rising hopes for a deal between E.U. & U.K. but lost some of its daily gains after the release of U.S. on-Farm Employment Change.

Matt Hancock, the Cabinet Minister of the U.K., said that a trade deal with the E.U. was still possible on very reasonable demands. In the latest rounds, both sides admitted that a little progress was made, and they were very hopeful that no-deal outcomes to the talks could be avoided.

The U.K. & E.U. differences have remained under four key points of fisheries: competition rules, governance, and police cooperation. UK PM Boris Johnson and President of European Commission, Ursula von der Leyen, are expected to meet later this month.

The U.K. has only until the end of June to apply for the extension of the transition period, but Johnson has ruled it out. However, the hopes that U.K. & E.U. will reach a deal after the described little progress in talks from both sides increased, and hence, the pair GBP/USD found traction in the market.

Whereas, the investors think that chances for no-deal Brexit were more than ever because the coronavirus pandemic will lead to one of the worst recessions in modern history, and investors think that hardcore Brexiteers will use the recession as a perfect distraction to get to a no-deal Brexit done.

On the data front, at 12:30 GMT, the Halifax Housing Price Index for May from the United Kingdom was declined by 0.2% against the expected decline of 0.7% and supported British Pound which ultimately pushed the GBP/USD pair on bullish track on Friday and added in the pair gains.

Meanwhile, the U.S. dollar strength after the release of US Non-Farm Employment Change exerted pressure on the rising prices of GBP/USD pair on Friday and made it lose some of its daily gains.

Daily Support and Resistance

  • R3 1.28
  • R2 1.2765
  • R1 1.2742

Pivot Point 1.2707

  • S1 1.2684
  • S2 1.2649
  • S3 1.2627

GBP/USD– Trading Tip

On Monday, the technical side of the GBP/USD seems bullish as the pair continues to reach 1.2690 levels, having violated the triple top level on the 4-hour timeframe. The GBP/USD pair has formed an upward regression trend channel, and it’s driving further buying trend in the Cable. Bullish Continuation of a bullish trend can lead to GBP/USD prices towards the next resistance level of 1.2760 level. Above this, the next resistance holds around 1.2795 level. Conversely, the support is likely to be found around 1.2665 and 1.2601 level today. Let’s look for selling below 1.2707 and buying above this level today. 

USD/JPY – Daily Analysis

The USD/JPY was closed at 109.573 after placing a high of 109.848 and a low of 109.042. Overall the movement of USD/JPY remained bullish throughout the day. The USD/JPY pair surged for the fourth consecutive day on Friday and gained some strong follow-through traction after the release of surprisingly stronger than expected U.S. monthly jobs data. The headline data of Friday, NFP, showed that 2.509M jobs were added in May, whereas the forecast was about 8M job loss.

Adding in the optimism was the unemployment rate, which beat the market expectations and was reported as 13.7% against 19.4% of expectations. Better than expected, data from the U.S. economy raised the bars for recent optimism over the sharp V-shaped recovery for global economic recovery. This increased the already stronger risk appetite In the market and hence, the USD/JPY pair gained for the 4th consecutive day on Friday.

At 4:30 GMT, the Household Spending for the year from Japan was declined by 11.1% against the expected decline of 12.8% and supported the Japanese Yen. At 10:00 GMT, the Leading Indicators from Japan remained flat with the expectations of 76.2%.

From the American side, the Average Hourly Earnings in May was declined by 1.0%, whereas it was expected to rise by 1.0%. The US Non-Farm Employment Change showed that 2.509M people were hired back in May, which were expected to show job loss of 7.750M people. The Unemployment Rate in April fell short of 19.4% expectations and came in as 13.3% and supported the U.S. dollar.

Daily Support and Resistance    

  • R3 109.79
  • R2 109.74
  • R1 109.67

Pivot Point 109.62

  • S1 109.56
  • S2 109.5
  • S3 109.44

USD/JPY – Trading Tips

The USD/JPY is consolidating in a narrow trading range of 109.800 – 109.255. The stronger than expected NFP figures drove buying in the USD/JPY pair on Friday, but now the traders seem to capture retracement in the market. A bearish breakout of 109.280 level can drive selling until the next support level of 109, which marks 38.2% Fibonacci retracement. The 50 EMA and MACD both are supporting the buying trend in the USD/JPY pair, and it can lead the USD/JPY prices further higher today. On the higher side, the resistance holds around 109.850. Let’s wait for a breakout of 109.800 – 109.255 to determine further trends in the USD/JPY pair. All the best for today! 

 

Categories
Crypto Market Analysis

Daily Crypto Review, Jun 08 – Cryptos Preparing For The Next Move – What To Expect?

The crypto market has spent this weekend mostly with low volatility and one Bitcoin’s sudden price spike, which triggered the market for a short while.  Bitcoin is currently trading for $9,755, which represents an increase of 0.59% on the day. Meanwhile, Ethereum gained 0.42% on the day, while XRP lost 0.7%.

The crypto market has spent this weekend mostly with low volatility and one Bitcoin’s sudden price spike, which triggered the market for a short while.  Bitcoin is currently trading for $9,755, which represents an increase of 0.59% on the day. Meanwhile, Ethereum gained 0.42% on the day, while XRP lost 0.7%.

The crypto market has spent this weekend mostly with low volatility and one Bitcoin’s sudden price spike, which triggered the market for a short while.  Bitcoin is currently trading for $9,755, which represents an increase of 0.59% on the day. Meanwhile, Ethereum gained 0.42% on the day, while XRP lost 0.7%.

Loopring took the position of today’s biggest daily gainer, with gains of 21.23%. IOST lost 3.13% of its daily value, making it the most prominent daily loser.

Bitcoin’s dominance increased slightly since we last reported, with its value currently at 65.25%. This value represents a 0.11% difference to the upside when compared to Friday’s value.

The cryptocurrency market capitalization decreased slightly over the weekend, with the market’s current value being $276.32 billion. This value represents an increase of $1.33 billion when compared to the value it had on Friday.

What happened in the past 24 hours

Another ransomware attack targeting the aerospace industry

ST Engineering Aerospace’s subsidiary (located in the US) suffered a ransomware attack that extracted somewhere around 1.5TB of sensitive data from their database. This Singapore-based company was, as the report says, attacked by the well-known ransomware organization called Maze.

The report shows that the data stolen by these criminals is related to many things, including contract details with various governments, organizations, as well as airlines across the globe.

_______________________________________________________________________

Technical analysis

_______________________________________________________________________

Bitcoin

The largest cryptocurrency by market capitalization has spent the weekend without much turbulence. The price was on a slow downward-facing path, testing and slowly breaking narrow ranges until bulls seem to have had enough. The price then jumped up from $9,350 to $9,820 before coming back to the levels it is at at the moment. The $9,735 level is currently being tested.


Bitcoin’s volume was decreasing gradually throughout the weekend until the most recent rise, which caused the price to go up.

Key levels to the upside                    Key levels to the downside

1: $9,870                                           1: $9,735

2: $10,010                                         2: $9,580

                                                           3: $9,250

Ethereum

Ethereum’s chart looks similar to Bitcoin’s chart, though the moves to both the upside and downside aren’t as pronounced. The second-largest cryptocurrency by market cap gradually decreased in price until the bulls stepped in and brought the price from $235 to $245. The bottom of this descending mini-trend was seemingly the 50-period moving average.


Ethereum’s volume increased during the upswing but quickly returned to its usual (low) levels.

Key levels to the upside                    Key levels to the downside

1: $251.4                                            1: $240

2: $260                                              2: $225.4

                                                           3: $217.6

Ripple

XRP has spent the weekend trading within a narrow range, bound by $0.2 support and $0.205 resistance level. Both of these levels got tested, but none showed any definitive signs of breaking. XRP’s future price direction will most likely be determined by Bitcoin’s next move.


Key levels to the upside                    Key levels to the downside

1: $0.205                                           1: $0.2

2: $0.214                                           2: $0.19

 3: $0.227                                                        

 

Categories
Forex Elliott Wave

Advanced Applications in Wave Analysis – Part 4 of 4

Introduction

Introduction

Introduction

In the previous educational article, we presented the contracting triangles and the restricting group. In this last part of our four-part series, we’ll show the non-restrictive contracting triangles and the expanding triangles with its variations. 

Non-Restrictive Triangles

This sub-group of triangles is characterized by locates in any other part of the wave cycle, not exclusively in waves 4 or B. The knowledge of this type of triangles could be useful to the wave analyst in the study of complex corrective patterns. This type of triangles tends to be produced at the end of complex corrections. Frequently, non-restrictive triangles tend to be more simple to identify than restrictive triangles.

  • Wave A. This segment tends to be the most volatile in terms of price at the time of the triangle. According to the alternation principle, if wave A is violent and takes a small portion of its completion, wave B will be slower and complex than wave A.
  • Wave E. In this scenario, the last segment of a non-restrictive contracting triangle, tends to develop a non-restrictive triangle. In other words, wave E could make a triangle inside a triangle of the upper degree. From the different types of non-restrictive triangles, the horizontal triangle tends to be the most common in the real market. The following list exposes the parts where the non-restrictive triangle.
    • Wave E in a horizontal triangle.
    • Last movement of a complex correction as a double or triple corrective pattern.
    • The fifth wave of an impulsive terminal structure.
    • The wave X of a complex correction.

Expanding Triangles

The expanding triangle tends to cheat the wave analyst more than the contracting triangle. This situation occurs because when the price moves in a volatile session, it tends to create a false breakout and quickly resuming its original trend.

The main characteristics of an expanding triangle are:

  • Wave A or wave B will be the shortest wave of the triangle.
  • Wave E tends to develop an explosive movement, higher in terms of price and time than the other waves.
  • In the same way that in contracting triangles, a contracting triangle can produce in wave E, in an expanding triangle, it can construct an expanding triangle.
  • The next movement of the triangle, which could correspond to wave C or 5, should not retrace the advance of wave E entirely.
  • The expanding triangle usually does not follow any Fibonacci relationship.
  • Expanding triangles normally occurs after a powerful movement such as an extended wave or an extended wave C. 

Restrictive Expanding Triangles

The restrictive expanding triangle tends to be placed in waves 4 and B. If the expanding triangle locates in wave B, the triangle belongs to a flat pattern. The rules applied to this group of expanding triangles are as follows:

  1. Waves A and E will be related through a 161.8%, being the wave E the largest segment.
  2. Wave A or B must be the shortest segment of the triangle.
  3. Only wave B or D can fail to try to surpass the previous wave.

Horizontal Expanding Triangle. The characteristics of this pattern are as follows:

  1. Wave A is the shortest segment of the triangle.
  2. Each leg after wave A will be larger than the previous segment.
  3. Wave E should be the most volatile, complex, and longer terms of time than the other waves.
  4. Wave E tends to be 161.8% of wave A.

Irregular Expanding Triangle. This variation of the expanding triangle is the most common to find in the real market. The main characteristic of this variation is that every time that wave B try to surpass to wave A fails in its advance. Wave E and A are show a 161.8% relationship, being wave E the longest segment.

Continuous Expanding Triangle. This type of restrictive expanding triangle is the second most common pattern to find in the real market. The continuous triangle characterizes by failing when this tries to surpass the end of wave C. If wave D fails, the pattern could show a slight bullish or bearish bias. Finally, waves A and E will be related in a 261.8%, being wave E the longest segment.

Non-Restrictive Expanding Triangles

The non-restrictive expanding triangle pattern follows the same conditions as restrictive expanding triangles. Its main characteristics are as follows:

  • Usually, they don’t have any Fibonacci relationship in their internal segments. The only relationship could be found on waves A and E, where wave E length could be 261.8% of wave A length.
  • The apex of the expanding triangle occurs before the triangle. If the apex occurs between 20% and the start of the expanding triangle, the formation should be non-restrictive.

Conclusions

In this educational article, corresponding to the last part of our four-part series covering the triangle pattern, we presented in the first section, the Non-Restrictive Contracting triangle. This group of contracting triangles tends to appear at the end of complex corrections, or the end of an impulsive terminal structure.

The second section corresponds to the expanding triangles, which are characterized by tricking the different market participants, who tend to think that the market has reversed and, after its last volatile movement corresponding to wave E, they discovered that the market in fact is resuming its previous trend.

Suggested Readings

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

 

Categories
Forex Course

121. Trading The Bullish & Bearish AB=CD Harmonic Pattern

Introduction

Introduction

Introduction

The ABCD is one of the most straightforward patterns in the Harmonic lot. There are two types of ABCD patterns – Bullish AB=CD & Bearish AB=CD. For both the bearish and bullish versions, the AB and CD lines are the legs, whereas the BC line is considered the Retracement or correction. To confirm the formation of this pattern, we use Fibonacci levels that we have discussed in the previous course lessons.

By using the Fibonacci tool on leg AB, see if the BC retracement is reaching the 0.618 level. Next, the line CD should be the extension of 1.272 Fibonacci extensions of BC. This rule applies to both bearish and bullish AB=CD patterns. We go long or short when the price action reaches the point D of the corresponding pattern formed.

How To Trade The ABCD Harmonic Pattern

Bullish ABCD Pattern

The chart that you see below represents the formation of a bullish AB=CD pattern. The CD leg of the pattern is equal to the size of the AB leg. The BC move, which is a pullback, is 61.8% retracement of the AB move. Likewise, the CD move is the 127% retracement, which confirms the formation of a bullish AB=CD pattern on the EUR/USD Forex pair.

We have entered the market at point D, and the stop-loss is placed just below the D point. As you can see, we went for smaller stops, and there is a reason behind it. If the price action goes below point D, the pattern automatically gets invalid.

There are two take-profit areas in the pair. The first one is at point C, and the second is at point A. It all depends on at what point you desire to close your position. It is always advisable to close your positions at higher targets because the end goal for us is to milk the market as much as we can.

Bearish ABCD Pattern

The below NZD/CAD Forex pair represents the formation of a bearish AB=CD pattern. The AB leg of the pattern is equal to the CD leg. Furthermore, the BC is respecting the 61.8% retracement of the AB move, and the CD move was close to 127% extension of the BC move. We have gone short at point D as the price breakout happened.

In this example, we went for deeper targets. If the momentum of the prevailing trend is strong enough, going for a new lower low will be a good idea. The key to winning in trading is to follow the rules and think according to the market situation. These Harmonic patterns require a lot of patience and effort to trade. So it is strongly recommended to master this pattern in a demo account than to trade it in a live market.

Conclusion

The AB=CD is a reversal pattern that indicates the market trend reversal. The AB=CD pattern consists of three legs, and they form the zig-zag shape. This pattern is also known as a lightning bolt, as it looks like one. The AB=CD pattern can be used in any financial market and also in any trading timeframe. Follow the rules, no matter what, to make consistent profits from this pattern. Always execute your trade at point D and ride for the brand new higher high/lower low. Cheers.

[wp_quiz id=”76393″]
Categories
Forex Basic Strategies Forex Daily Topic

How ‘External Debt’ Presents A More Clear Picture Of A Nation’s Economy

Introduction

Introduction

Introduction

External Debt, unlike regular Government Debt, is typically more objective oriented and is indicative of future development plans for which the loan was taken. In this sense, understanding the source and size of External Debt can help us deduce the upcoming economic developmental changes occurring in the borrowing nation and corresponding benefits that could be derived by the lending party, be it a foreign Government or Banks.

What is External Debt?

It is the part of a country’s Debt that was borrowed from a source outside the country. External Debts are usually taken from Foreign Governments, Banks, or International Financial Institutions. The External Debt must be paid back in the currency in which the loan was initially taken and usually corresponds to the currency of the Foreign Government’s local currency. It puts a de facto obligation on the borrower to either hold those currency reserves or generate revenue through exports to that specific country.

External Debt is sometimes also referred to as Foreign Debt and can be procured by institutions also apart from the Government. Typically External Debt is taken in the form of a tied loan, which means the loan taken must be utilized or spent back into the nation financing the Debt.

For example, if country A takes an External Debt from country B for developing a corn syrup factory, then it may purchase the raw materials required for construction and raw input like corn from the lender itself. It ensures that the lender benefits to a greater extent apart from the interest revenue on the lent money. Hence, in general, the External Debt, specifically tied loans, are transacted for specific purposes that are defined and agreed upon by both lending and borrowing countries.

How can the External Debt numbers be used for analysis?

External Debt takes precedence over Internal or Domestic Debts as agencies like the International Monetary Fund monitor the External Debts, and also, the World Bank publishes a quarterly report on External Debt.

Any default on External Debt can have ripple effects on the credibility of the nation. Internal Debts may be managed, but once Debt is External, it is public information, and defaulting affects the credit rating, and the country is said to be in a Sovereign Default.

When a country is either unable or refuses to pay the Debt back, then lenders will withhold future releases of assets that are essential for the borrowing country. When a country defaults on Debt, the liquidity of the Government and the nation is questioned. It leads to investors and speculators quickly lose confidence in the Government’s ability to manage the economy effectively and withdraw their investments, bringing the nation to a standstill. In the currency market, such situations lead to currency depreciations very quickly.

Once Debt levels cross a certain threshold (generally, it is 77-80% of the GDP) where default risk increases, it becomes a vicious cycle. The knock-on effects of Debt servicing to decreased spending to slowing the economy all result in a recession or a societal collapse in extreme cases.

Impact on Currency

Government Debt is usually taken to finance public spending and build future projects that can help boost the economy. External Debt, when taken, is inflationary for the economy internally and leads to currency depreciation as it floods the market with the domestic currency through its spending. Hence, optimal utilization of the Debt so that it pays off, in the long run, is essential. When a country takes on Foreign Debt and spends its currency depreciates in the short-run for the duration of spending and vice-versa.

Although, the size of the External Debt compared to the economy’s size and its revenue should also be taken into account as the size of the Debt is relative. Underdeveloped economies Debt Sizes are not comparable on a one-to-one basis with those of the developed economies. External Debt is also one of the parts of the total Government Debt and hence, is not a macro indicator when compared to the likes of Total Government Debt and Total Government Debt to GDP ratio in general.

Hence, External Debt is a low impact lagging indicator as it does not account for the complete economic picture. The reasons for taking on External Debt by organizations or Governments, in general, would have been announced months ahead through which economists and investors can make decisions accordingly. Also, the changes that the Government intends to bring through the Debt can be traced through other macroeconomic indicators better than External Debt as an indicator in isolation.

Economic Reports

The World Bank maintains the aggregate External Debt data for various countries on their official website and publishes quarterly reports.

For the United States, the Treasury Department publishes the Gross External Debt reports on its official website. It releases its reports at 4 PM in Washington D.C. on the last business day of March, June, and September, and at 1 PM on the last business day of December for the corresponding quarters.

Sources of External Debt

Below are some of the most credible sources for ‘External Debt.’

Impact of the ‘External Debt’ news release on the price charts 

In the previous section of the article, we understood the External Debt fundamental indicator, which essentially represents the amount a country (both public and private sector) owe to other countries. They involve outstanding loans to foreign private banks, international organizations like the IMF, and interest payments to other institutions. Growing levels of Debt reduce GDP because the monetary payments flow out of the country. It will discourage foreign and private investment because of the concerns that the Debt is becoming unsustainable. Therefore, a country’s External Debt should be at a very nominal level.

In today’s lesson, we will illustrate the impact of External Debt on various currency pairs and examine the change in volatility due to the news announcement. For that, we have collected the data of Sweden, where the below image shows External Debt of the country during the 4th quarter. The data shows a marginal increase in Debt compared to the previous quarter, which means it may not severely affect the currency. Let us find out the reaction of the market to this data.

USD/SEK | Before the announcement:

Firstly, we will look at the USD/SEK currency pair and analyze the impact of External Debt on the price. In the above image, we see that the price was in a downtrend, and recently the market has reversed to the upside, which could be a possible reversal. If the price breaks previous resistance, we can confidently say that the market has reversed to the upside. Looking at the impact of the news release, we will position ourselves accordingly.

USD/SEK | After the announcement:

After the news announcement, the price slightly goes higher and closes exactly at the resistance area. The price after the close of ‘news candle’ is at a very crucial level. Later, we see that the volatility continues to expand on the upside, signaling a change of the trend. As the External Debt data was slightly on the weaker side, traders bought the currency pair by selling Swedish Koruna. However, the price continues to move higher after the news release resulting in further weakening of the currency.

EUR/SEK | Before the announcement:

EUR/SEK | After the announcement:

The above images represent the EUR/CZK currency pair, where we see that market was in a downtrend, and now it has pulled back from the ‘low.’ This is an ideal place for taking a ‘short’ trade, but since the volatility is exceedingly less, we should be careful before entering the market. Low volatile pairs are not desirable for trading purposes as they carry additional costs such as high Slippage, above normal Spreads, and difficulty in order execution.

For these reasons, pairs like EUR/CZK should be avoided. After the news announcement, there is hardly any impact on the currency where the price remains at the same level during and after the announcement. Thus, we don’t witness any volatility in the market, and the External Debt data did not bring any change in the price of the currency.

AUD/SEK | Before the announcement:

AUD/SEK | After the announcement:

The above images are that of the AUD/CZK currency pair, where we see that the market is in a downtrend before the announcement, and recently the price has moved above the moving average, which could be a sign of reversal. Without having many assumptions, it is wise to wait for the news release, and depending on the impact of External debt news, we will take a suitable position.

After the news announcement, the price moves higher, reacting negatively to the External Debt data, which was slightly lower than last time. The volatility increases to the upside as traders go ‘short’ in Swedish Koruna. The price exactly bounces off from the moving average, indicating a possible reversal of the trend.

That’s about ‘External Debt’ 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!