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Forex Elliott Wave Forex Market Analysis

EURNZD Consolidates after Bouncing from its Recent Lows

The EURNZD cross is seen consolidating near the extreme bearish sentiment zone backed by the strength of the New Zealand dollar. This consolidation suggests a pause of the downward sequence that began on August 20th and ended heavily oversold after its latest decline that drove it to 1.69472.

Technical Overview

The following 12-hour chart illustrates the short-term markets participants’ sentiment bounded by the 90 high and low range, which shows the price consolidating in the extreme bearish sentiment zone after the cross found support on 1.69472 on November 24th.

Furthermore, the previous chart shows the primary trend outlined a blue trend-line that tells the bias remains mostly bearish. Likewise, the secondary trend represented with the green trend-line exposes the downward acceleration, and, shows also its consolidation range between the levels of 1.69472 and 1.72664.

Finally, as long as the EURNZD cross keeps moving below level 1.72664, the bias will remain bearish, so we could expect further drops, likely below 1.69472. Whereas, the breakout of the extreme bearish zone of 1.72664 to the upside could indicate the start of a recovery.

Short-term Technical Outlook

The short-term outlook for the EURNZD cross under the Elliott Wave perspective is shown in the next 2-hour chart and seen moving in an incomplete downward sequence. The current leg in which is moving corresponds to the wave ((c)) of Minute degree labeled in black.  Within that wave ((c)), the price is advancing in its fourth wave of Minuette degree identified in blue.

 

We see all that the wave ((c)) of Minute degree labeled in black came after the completion of the wave ((b)), which ends on 1.80212 where the cross found fresh sellers dragging it in an accelerated bearish movement. In this context, the current wave ((c)) should develop an internal structure of five waves.

Right now, the chart shows the action is happening in its fourth wave, in blue, which could be advancing in its internal wave b of Subminuette degree identified in green. This leg could possibly test November’s lows. Likewise, considering that the third wave, in blue, looks like an extended wave, the fourth wave should be complex in price, time, or both. Therefore, the current corrective wave could continue evlving likely until early 2021.

Concerning the fifth wave, in blue, and considering that the third one of the same degree was the extended movement, there are two potential scenarios for the cross:

  • First scenario: the cross fails in its downward sequence finding fresh buyers above the end of the third wave, in blue, at 1.69472.
  • Second scenario: the cross penetrates below 1.69472, creating a new lower low. In this case, this new leg down could continue until the psychological barrier of 1.68.

In summary, the EURNZD cross currently moves in a corrective formation in the extreme bearish sentiment zone. In this context, our principal bias remains neutral until the completion of the fourth wave in blue. Once the cross ends the current consolidation, we could seek short positions following the direction of the fifth wave. Finally, the invalidation level of the bearish scenario locates at 1.73606.

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Forex Market Analysis

Daily F.X. Analysis, December 11 – Top Trade Setups In Forex on Friday! 

On the news front, eyes will remain on the German Final CPI m/m, which are expected to remain unchanged, and it may not drive any major movement in the market. BOE Gov Bailey is due to hold a press conference about the Financial Stability Report in London. Euro Summit also remains in highlight as the heads of state from the European Union countries are due to discuss the banking union and the capital markets union in Brussels.

 


EUR/USD – Daily Analysis

The EUR/USD closed at 1.21215 after placing a high of 1.21588 and a low of 1.20633. After falling for four consecutive days, the EUR/USD pair rose on Thursday amid the European Central Bank’s latest decision.

On Thursday, the European Central Bank held its interest rates on its main refinancing operations at 0.00%, marginal lending facility at 0.25%, and the deposit facility at -0.50%. ECB said that it would continue to monitor the exchange rate’s developments about their possible implications for the medium-term inflation outlook.

The European Central Bank expanded its massive monetary stimulus program by another 500 billion euros as the second wave of lockdown measures weighed on the euro area’s economic recovery. It also expanded the emergency bond purchases scheme for nine months worth 1.85 trillion euros and aimed to keep firms and governments afloat until the economy was ready to re-open.

Central Bank also announced that it would hold the interest rates at the same level until the inflation outlook comes close to its below 2% target. The additional support to the Eurozone economy from ECB added that the Eurozone economy will now recover quickly. These hopes added strength in the single currency Euro that helped EUR/USD pair to post gains on Thursday. Meanwhile, on the Data front, at 12:45 GMT, the French Industrial Production for October raised to 1.6% against the expected 0.4% and supported the single currency Euro. From the U.S. side, at 18:30 GMT, the CPI for November rose to 0.2% against the estimated 0.1% and supported the U.S. dollar. The Core CPI for November also raised to 0.2% against the expected 0.1% and supported the U.S. dollar. The Unemployment Claims from last week rose to 853K against the forecasted 723K and weighed on the U.S. dollar that added strength in the EUR/USD pair on Thursday.

The U.S. dollar was also weak on Thursday as the Unemployment claims rose from their expected level during last week due to increased restrictive measures in the U.S. and supported the EUR/USD pair’s upward trend. Furthermore, the U.S. dollar came under more pressure after releasing additional stimulus by the European Central Bank. The U.S. lawmakers were also unable to sort out disagreements over aid to state and local governments, holding up a broader spending package. The U.S. dollar weakness added further support to the upward momentum of the EUR/USD pair.

Daily Technical Levels

Support   Resistance

1.2044       1.2133

1.2006       1.2186

1.1954       1.2223

Pivot point: 1.2096

EUR/USD– Trading Tip

The technical side of the EUR/USD continues to remain the same as the pair is trading at 1.2103 level, facing immediate resistance at 1.2160 and 1.2196 level along with a support level of 1.2085. Closing of candles below the 1.2103 level can send the EUR/USD pair further lower until 1.2080 and 1.2040. Euro Summit will remain in highlights, and the choppy session is expected until the release of the event.

 


GBP/USD – Daily Analysis

The GBP/USD pair was closed at 1.32900 after placing a high of 1.34108 and a low of 1.32453. The GBP/USD pair declined on Thursday as the meeting between PM Boris Johnson and E.U. Commission President Ursula von der Leyen failed to bridge major gaps between them.

PM Boris Johnson offered his ministers to prepare for the strong possibility of a no-deal Brexit. He said that the E.U.’s current offer was unacceptable because the U.K. could not be treated like its twin. He added that the deal offered by the E.U. was not sensible and was unlike any other free trade deal. He said that it was a way of keeping the U.K. locked in the E.U.’s regulatory orbit.

Johnson added a strong possibility that they would have a solution that will be much more like an Australian & Canadian relationship with the E.U. However, after the meeting, the PM Boris Johnson and E.U. Commission President Ursula von der Leyen agreed that a firm decision should be taken about the future of the talks by Sunday. The talks between the E.U.’s top negotiator Michel Barnier and the U.K.’s top negotiator David Frost will resume Brussels. Whereas, Foreign Secretary Dominic Raab said that it was unlikely the negotiations would be extended beyond Sunday.

At 05:30 GMT, the RICS House Price Balance from the U.K. raised 66% against the estimated 64% and supported British Pound. At 12:00 GMT, the Construction Output in October declined to 1.0% against the expectations of 1.2%. The Gross Domestic Product from Great Britain in October remained flat with expectations of 0.4%. The Goods Trade Balance from the U.K. showed a deficit of -12.0B against the forecasted -9.6B and weighed on British Pound and added losses in the GBP/USD pair. The Index of Services for the quarter also dropped to 9.7% against the expected 9.8% and weighed on Sterling and added further losses in GBP/USD pair. The Industrial Production in October surged to 1.3% against the expected 0.3% and supported British Pound. The Manufacturing Production for October also raised to 1.7% against the projected 0.3% and supported British Pound. 

At 18:30 GMT, the CPI for November surged to 0.2% against the anticipated 0.1% and supported the U.S. dollar that added pressure on GBP/USD pair. For November, the Core CPI also rose to 0.2% against the anticipated 0.1% and supported the U.S. dollar and added losses on GBP/USD pair. The Unemployment Claims from last week increased to 853K against the anticipated 723K and weighed on the U.S. dollar.

Moreover, the E.U. outlined contingency measures for a no-deal Brexit that reflected significant uncertainty whether a deal would be in place on January 1, 2021. This also raised the expectations that a Brexit deal might not be reached and weighed on GBP/USD pair on Thursday.

Daily Technical Levels

Support   Resistance

1.3338       1.3466

1.3280       1.3536

1.3209       1.3594

Pivot point: 1.3408

GBP/USD– Trading Tip

The GBP/USD is trading at the 1.3313 level, holding below an immediate resistance level of 1.3322. On the upper side, the GBP/USD pair can lead to a 1.3390 level, and support stays at 1.3269, which is extended by a double bottom level. Selling bias seems dominant, therefore, we should be looking for a sell trade only upon the violation of 1.3265 level. The lagging technical indicators like 50 EMA is suggesting selling bias, thus we should look for selling trades below 1.3400 and upon breakout 1.3265 level too.   

 


USD/JPY – Daily Analysis

The USD/JPY was closed at 104.212 after placing a high of 104.577 and a low of 104.139. The USD/JPY pair rose in the early trading session on Thursday amid the rising risk sentiment in the market after the stimulus measure from ECB and the vaccine optimism. On Thursday, an independent committee of experts recommended the U.S. Food and Drug Administration to approve the use of Pfizer and BioNtech’s coronavirus vaccine for people over the age of 16. It will be up to the FDA to decide whether to follow the recommendation or not. The agency is anticipated to announce its decision within days, and if it decides to approve the vaccine, then the health care workers could begin receiving the shots almost immediately.

The vaccine optimism in the U.S. raised the risk sentiment in the market as the chances for vaccine approval raised the chance for quick economic recovery and weighed on the safe-haven Japanese Yen, which ultimately added gains in the USD/JPY pair. The European Central Bank announced expanding its debt purchases scheme and further stimulus measures that also added in the market’s risk sentiment and supported the upward trend in the USD/JPY pair after weighing on the safe-haven Japanese Yen.

However, the USD/JPY pair failed to hold its gain on Thursday and started to decline as the U.S. Unemployment claims from last week raised to their highest since September 19 level. The rise in Americans’ jobless claim benefits was due to the states’ increased restrictive measures that halted economic activities. The raised unemployment claims weighed on the U.S. dollar and dragged the USD/JPY pair on the downside. 

On the data front, at 04:50 GMT, the BSI Manufacturing Index for the 4th quarter raised to 21.6 from the expectations of 3.5 and supported the Japanese Yen and weighed on the USD/JPY pair. The Producer Price Index from Japan came in line as expected -2.2%.

From the U.S. side, at 18:30 GMT, the CPI for November rose to 0.2% against the projected 0.1% and supported the U.S. dollar. The Core CPI for November also raised to 0.2% against the estimated 0.1% and supported the U.S. dollar. The Unemployment Claims from last week rose to 853K against the forecasted 723K and weighed on the U.S. dollar that made the USD/JPY pair to lose all of its gains on Thursday.

Daily Technical Levels

Support   Resistance

104.04        104.41

103.86        104.60

103.67        104.78

Pivot Point: 104.23

USD/JPY – Trading Tips

The USD/JPY violation of the symmetric triangle pattern at 104.346 faked out as the safe-haven currency pair reversed trade within the same triangle pattern. The current trading range of the USD/JPY pair remains 104.375 – 103.650, and violation of this range can extend the selling trend until the next support area of 103.200 level. Typically, such a triangle pattern can breakout on either side; this, we should be careful before opening any trade. The market is neutral as investors seem to wind up their positions ahead of the December holidays. Good luck

Categories
Crypto Market Analysis

Daily Crypto Review, Dec 11 – Bitcoin Fighting for $18,000; Crypto Market in the Red

The majority of the cryptocurrency sector has ended up being in the red as Bitcoin spent most of the day under the $18,000 level. Bitcoin is currently trading for $17,920, representing a decrease of 2.91% compared to our last report. Meanwhile, Ethereum’s price has decreased by 4.30% on the day, while XRP managed to lost 2.85%.

 Daily Crypto Sector Heat Map

Freedom Reserve gained 950.51% in the past 24 hours, making it the most prominent daily crypto gainer by far. It is followed by LBRY Credits’s 336.6% and Seigniorage Shares’ 117.99% gain. On the other hand, Basis Cash lost 87.95%, making it the most prominent daily loser. It is followed by xBTC’s loss of 55.09% and IterationSyndicate’s loss of 44.55%.

Top 10 24-hour Performers (Click to enlarge)

Bottom 10 24-hour Performers (Click to enlarge)

Bitcoin’s market dominance has moved up less than half a percent since we last reported, with its value currently being 62.8%. This value represents a 0.2% difference to the upside compared to the value it had when we last reported.

Daily Crypto Market Cap Chart

The cryptocurrency sector capitalization has decreased in the past 24 hours, with its current value being $528.97 46.31 billion. This represents a $17.34 billion decrease when compared to our previous report.

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What happened in the past 24 hours?

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Technical analysis

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Bitcoin

Bitcoin has spent most of the day in a price descent after it failed to break the $18,600 mark. BTC bulls tried to pick the price back up but failed, which has caused another mini-dip, which brought the price as low as $17,721 on Bitstamp. The $17,780 level has proven itself as great support once again, and Bitcoin is now trading in a range between it and $18,190.

Due to the amount of support and resistance levels in a narrow price range Bitcoin currently has, a push towards either side could be a possible safe trade to catch.

BTC/USD 2-hour chart

Bitcoin’s short-term technicals are tilted towards the sell-side but show slight signs of neutrality. Its long-time technicals, however, are completely bullish.

BTC/USD 1-day Technicals

Technical factors (4-hour Chart):
  • Price is below both its 50-period and 21-period EMAs
  • Price is close to its bottom Bollinger band
  • RSI is dipping towards being oversold (36.77)
  • Volume is slightly above the average level
Key levels to the upside          Key levels to the downside

1: $18,190                                 1: $17,780

2: $18,600                                 2: $17,500

3: $18,790                                  3: $17,200

Ethereum

Ethereum has quickly stopped in its tracks towards $600 after hitting a brick wall at $581. The rebound pulled its price back below $565, as well as $545, which it is now fighting for. The fact that Ethereum is in a short-term bear run is confirmed by higher volume candles during price drops than during price spikes.

Our call from yesterday regarding Ethereum’s dip after dropping below $565 turned out as predicted. Traders should pay attention to Bitcoin’s movements and the ascending (red) trend line when trading Etheruem.

ETH/USD 2-hour Chart

Ethereum’s short-term technicals are tilted towards the sell-side but show slight neutral signs. However, its long-time technicals are bullish, with its weekly overview being slightly neutral than its monthly overview.

ETH/USD 1-day Technicals

Technical Factors (4-hour Chart):
  • Price is below both its 50-period and 21-period EMAs
  • Price is slightly above its bottom Bollinger band
  • RSI is dipping towards oversold territory (36.18)
  • Volume is slightly above the average level
Key levels to the upside          Key levels to the downside

1: $565                                     1: $545

2: $581                                      2: $525 

3: $600                                      3: $510

Ripple

XRP followed the rest of the crypto sector and made a price dip, which brought its price to the $0.543 level, which held up quite nicely. Its price is now recovering and consolidating between $0.543 and $0.57, with no signs of potential movement to either side.

XRP traders should pay attention to Bitcoin’s price movement, as most cryptocurrencies follow the general market direction it sets.

XRP/USD 2-hour Chart

XRP’s 4-hour and daily overviews show confusing signs, with some indicators being bullish and some bearish. Its long-term technicals are, however, completely bullish.

XRP/USD 1-day Technicals

Technical factors (4-hour Chart):
  • The price is currently below both its 50-period EMA and its 21-period EMA
  • Price is slightly below its middle Bollinger band
  • RSI is neutral (41.75)
  • Volume is slightly above the average level
Key levels to the upside          Key levels to the downside

1: $0.57                                   1: $0.5435

2: $0.6                                       2: $0.5

3: $0.63                                    3: $0.475

Categories
Forex Videos

Forex Trading Algorithms Part 1-Converting Trading Strategy To EA’s & Running Tests On Profitability

Trading Algorithms –  An Introduction

 

Almost all traders, novices and pros alike, know at least the basics of technical analysis. Still, not many know how to convert a trading idea into a set of rules and then test them for profitability.  This video series aims to be an introduction to algorithms applied to trading. Even if you are not considering creating one EA or trading bot, we think it is very interesting to be proficient in converting your trading idea into formal code and test it. We will use mostly pseudo-code, but also python, a very easy-to-learn but powerful high-level language, and Easylanguage, developed by Tradestation, which is almost as pseudo-code because it was designed to be read as a natural language.

 

What is an algorithm?

An algorithm is a set of rules to perform a task in a finite number of steps. Basically, an algorithm is a recipe.

 

For example, if we were to create an algorithm to make a phone call manually. A possible solution could be this :

1.- Open the phone
2.- select the keyboard
3.- dial each number from left to right
4.- Click the green phone icon
5.- Hear the calling sound

6.- Busy tone?
    A- no ---> wait  60 seconds for the answer.
        Did somebody answer?
                Yes--> Start a conversation
                    I - Conversation ended?
                            Yes --> Hang up.
                No --> Hang up
    B- Yes ---> Wait 120 seconds and go to 4th step

Algorithms  used in Trading

There are many ways to create Trading algorithms, including advanced sentiment analysis, evaluating the words used in trading forums and news releases. Still, we will focus on algorithms for historical price action data series.

 The ability to create, test, and evaluate a trading algorithm is a terrific ability to own. This allows creating market models that map and profit from the market’s inefficiencies. If you happen to find one set of rules that historically made profits, it could likely continue making profits in the future. This is the basic premise of automated algos, expert advisors, and trading bots.

 

Algorithm properties

  • Inputs: zero or more values can be externally supplied. Some algorithms don’t need inputs, although the majority will, and of course, a trading algorithm will need to get timely data from the market to generate outputs.
  • Outputs: at least one result should be delivered. That is logical. The output may not only be a text. It can be a picture, a sound, or a market trading order.
  • Unambiguous: Each instruction must be explicit, with a single meaning.
  • Finite: It ends after a limited number of steps.
  • The algorithm should precisely specify what the computer should do. The computer is not smart. It is dumb. You should tell it precisely the action it has to make.
  • Effective: Every instruction should be basic enough to be made by hand or uses other algorithmic sub-units with the same property. Of course, the action must be feasible, which means the computer can perform that action because the instruction is included in the instruction set of the programming language you’re using.

The key to a good algorithm, as with recipes, is to break the ideas down into simple building blocks.

Flow Diagrams

Algorithms can be more complicated than a simple recipe. Besides, a recipe is interpreted by a (supposedly) intelligent cooker. On the other hand, algorithms are to be interpreted by brainless CPUs. Besides, algorithms usually accept a stream of data inputs, which must be transformed until an output or output is produced.  Flow diagrams are a pictorial representation of the algorithm’s process and data flow.

A Flow diagram is a very handy tool to develop your ideas into coherent algorithms because it helps you spot potential flaws and improvements and should be the first step before proceeding to the actual code.

 

In the next chapters, we will continue developing this basic idea, applied to trading, using trading examples.

 

Further reading:

The Ultimate Algorithm Trading Toolbox, by George Pruitt.

 

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Forex Videos

Forex Position Sizing Part 12 – Two Tier Optimal F Part 2


Position Sizing XIII- Two-Tier Optimal f Part II

 

In Two-Tier Optimal f part I, we discussed the virtues and drawbacks of optimal f trading. In this part II video, we will present a methodology that will almost ensure that our initial capital is preserved with the possibility of astonishing growth factors on our trading account. This content is exclusive, and, so far, you will not see it explained elsewhere.

 

System requirements:

This methodology is valid only with profitable strategies. This method is not a miracle solution for losing systems.

It works best when the risk is homogeneous. That is, the dollar risk is a constant R factor to the rewards.

The better the system, the higher the and smoother are the rewards.

 

The Two-tier Strategy

1.- We split the trading account un two portions. One portion ( 25% of the total in our case) will be used with Optimal f positioning. The other part will be applied to a 1% risk positioning.

2.- After a determined goal (2X, 5X, 10X, 20X of the Opt-f portion), the account will be rebalanced ( by adding both sub-balances together) and then re-split(25%-75%) to start a new cycle. The cycle will also reboot itself if the Opt-f section’s balance goes below 25% of the value at the beginning of that cycle.

 

What was the procedure to test the two-tier Opt-f position system?

We took the current Signal Table closes signals and created two 10K trading histories of what would have been one year of trading activity. Thus, resulting in two collections of 10,000m years of trading data. One of the collections was to be used with the Optimal f position sizing portion, and the other one was employed in the 75%-portion of the account. The Python code for the entire simulation is shown below.

We did this procedure using several targets for the balance of the portion traded using Opt-f: 2X, 5X, 10X, and 20X. We focused the results on the following parameters: Average final capital, max final capital, min final capital, average trades need to 10X total capital appreciation, average max drawdown, The drawdown with 1% probability of occurrence. In the below table, we also present the results of the 1% risk and 100% Opt-f strategies. ( click the image to enlarge).

 

 

Discussion

We see that the 1% risk strategy is not bad at all since it can multiply by five the initial balance in one year. It does this with an average max drawdown of 8.79 percent, with the odds of reaching a 16.2% drawdown on one every 100 years. We see also that, on average, it needs 664 trades to multiply by ten the initial capital.  

On all two-tier columns, we see a remarkable fact that the min final capital is 10,486. That meant that in all the 10K years of simulated market action, not a single one ended below the initial 10K balance. Thus, this strategy seems to protect us against the loss of the initial capital. That is a terrific psychological reinforcement to withstand the high max drawdowns it presents.  The use of the 2X goal is the best choice for the less bold investors, as this method offers an average max drawdown of 38.32%, with a 1% chance of reaching 59% drawdown.  After one year, the average final capital is $8.5 million, with a starting capital of only 10K.  This positioning strategy multiplies by ten the capital, on average, every 113 trades. The second best choice is a 5X goal.  That will more than double the yearly returns at the expense of a near 50% drawdown on average.   On the table, we can see that the more we increase the goals to rebalance, the more the account growth, but also the max drawdown.

We can see that these strategies’ growth is orders of magnitude lower than fully Optf position sizing. Still, the attractiveness of this strategy is that the odds of being smaller than 10K after one year of trading are virtually none.

More ideas

We used 1% as the size used in 75% of the total capital in the preceding trading sizing proposals. Of course, we could modify that to better profit from the total capital with almost no increase in drawdown and fully preserving our initial capital. You can make your own simulations on this to find the best fit for you. As examples, let’s present three more simulations using Optf/10, Optf/ 5, and Optf/2 with 2X rebalancing goals. 

 

In the image above, we see that using Optf/5 in 75% of the capital will deliver huge profits with 40%-63% Drawdown figures and 79 trades to 10X capital appreciation. All this with almost no chance to blow up the account. 

Final words

This video shows exclusive and never taught position sizing methodologies that protect the initial capital and offer vastly superior results to the 1% risk standard methodology.  But you must be aware that we are assuming the trading strategy is effective long term. The trader will also need to find the safest optimal f value by performing the proper computer simulations.

That also shows that position sizing is part of a trading system that really helps you achieve your monetary objectives. And for optimizing it, you need to know the optimal f of the system you’re using.

Of course, the market will limit the trading size we can reach without influencing it, but as theory, these methodologies are real wealth multipliers for the serious trader.

To employ a two-tier methodology in the real market, you will need to be fully organized, have an appropriate spreadsheet to follow the trade results, have two split balances, and compute the size of the coming positions.

Categories
Forex Course

189. Summary – Trading The News

What did we learn till now? 

Sometimes in the forex market, the movement of prices seems random. In the previous series of courses, we have shown that most of the randomness you observe can be explained. By now, you should be capable of identifying the various news releases published daily. You should also be able to determine which currency pairs the news release is likely to impact.

In this final course, we’ll recap all that we have learned so far.

When it comes to news trading, a forex trader can either have a directional bias to trading or have a non-directional bias. For directionally biased traders, they have to:

  • Familiarise themselves with the economic calendar to know when economic indicators are scheduled for release
  • Understand the impact that each indicator might have and which currency pairs are best to trade
  • Understand that the analysts’ consensus or expectations are what determines if the news release is negative, positive, or in-line
  • Know which news releases to avoid trading

On the other hand, forex traders who have a non-directional bias do not necessarily need to familiarise themselves with these conditions. Such traders only need to know two things.

  • The scheduled release of economic indicators, speeches by influential people, and significant geopolitical events
  • Whether the upcoming event is of a high or low impact

Traders with a non-directional bias only concern themselves with the magnitude of the price movement after an event – not the direction. That is why they adopt the straddle strategy.

The straddle strategy uses forex stop orders, which triggers long or short positions if the market significantly moves in either direction. The buy stop order will trigger a long trade if the news release results in a bullish market. With the sell stop order, s short sell will be executed if the news release results in a bear market.

Remember to be careful when trading the news. Always keep an eye on the prevailing macroeconomic trends and geopolitical events. The overall market sentiment can sometimes amplify or dampen the impact of a news release.

If, for example, moments before the release of UK manufacturing data, the market receives news that the ongoing Brexit negotiations have hit a snag. If the manufacturing data is positive, its impact on the market will be dampened; if the release is negative, its impact will be magnified. All the best.

Categories
Forex Elliott Wave Forex Technical Analysis

EURJPY Consolidates Expecting the ECB Decision Ahead

The EURJPY cross consolidates in the overnight trading session expecting the ECB interest rate decision statement that will take place before the U.S. opening bell. The analysts’ consensus doesn’t expect changes both in the interest rate that remains at 0.0% and in the deposit facility rate that keeps at -0.50%.

Source: TradingEconomics.com

Technical Overview

The following 8-hour chart shows the EURJPY market participants’ sentiment, where the cross looks consolidating in the extreme bullish zone, developing a flag pattern. This chartist pattern suggests the continuation of the previous movement. In this case, the technical formation could be indicative of further upsides for the following trading sessions.

Moreover, the primary trend identified with the upward trend-line in blue remains on the bullish side. Also, the secondary trendline plotted in green reveals the bullish acceleration of the price action. This market context is confirmed by the EMA(60) to Close Index, with a reading above the level 2.000 that suggests the overbought levels and the potential correction or consolidation of the previous rally.

Short-term Technical Outlook

The EURJPY under the intraday Elliott wave perspective unfolded in its 2-hour chart illustrates the advance in an incomplete corrective rally corresponding to wave ((b)) of Minute degree labeled in black. The internal structure shows the cross advancing in its incomplete wave (c) of Minuette degree marked in blue, suggesting a further upside in the following trading sessions.

At the same time, the previous chart reveals the internal five-wave sequence of wave (c) in blue, which exposes the sideways progress of its fourth wave of Subminuette degree identified in green, which belongs to the wave (c) of Minuette degree. 

In this context, considering that the price action could develop a new upward movement, the cross could advance in its fifth wave in green to the potential target zone between 126.84 and 127.48, where the EURJPY cross could complete the wave (c) in blue, and the wave ((b)) in black. Likewise, once this corrective rally completes, the price could start to develop a downward movement identified as wave ((c)) in black.

In this regard, according to the Elliott Wave theory and considering that the mid-term structure corresponds to an incomplete corrective formation constituted by a three-wave sequence, after the completion of the wave ((b)) in black, the price should start to decline in its wave ((c)) with an internal structure subdivided into a five-wave sequence.

Summarizing, the EURJPY cross currently develops a consolidation pattern, which leads to expect a new upward movement with a potential target between 126.84 and 127.48. Once the price completed its target, the cross may start to decline in a five-wave sequence corresponding to wave ((c)) of Minute degree.

Finally, the invalidation level of the current bullish scenario can be found at 124.566.

Categories
Forex Market Analysis

Daily F.X. Analysis, December 10 – Top Trade Setups In Forex – Eyes on ECB Policy Decision! 

On the news front, it’s going to be an important day for the Euro and U.S. dollar as investors await the Main Refinancing Rate and the U.S. CPI figures during the European and the U.S. session. The ECB monetary policy decision, especially the Main Refinancing Rate, is expected to remain unchanged while the Inflation figures can support the U.S. dollar today.

Economic Events to Watch Today  

 


EUR/USD – Daily Analysis

The EUR/USD pair was closed at 1.20811 after placing a high of 1.21471 and a low of 1.20585. On Wednesday, the currency pair EUR/USD continued its bearish trend for the fourth consecutive day amid the deteriorated risk sentiment and higher U.S. yields that supported the greenback. The U.S. dollar was strong on Wednesday as the U.S. Dollar Index (DXY) rose above the 91.00 level, which was the highest in two days. The coronavirus situation in the U.S. has escalated to an alarming level as more than 200,000 Americans tested positive for the coronavirus every day on average. The total number of infections in the U.S. has surpassed 15 million.

Dr. Anthony Fauci, the nation’s top infectious disease expert, warned on Monday that the country was likely to see a Thanksgiving-related spike in coronavirus cases and hospitalizations in another week or so, in the middle of Hanukkah and just ahead of Christmas. The rising number of coronavirus cases in the U.S. raised the appeal for safe-haven and supported the greenback that ultimately added losses in EUR/USD pair.

Meanwhile, another reason for the continuous losses in the EUR/USD pair was the latest news from Great Britain about the coronavirus vaccine. On Wednesday, Britain’s health officials warned people with significant allergies to avoid receiving the Pfizer-BioNtech vaccine as two people reported an adverse reaction.

On the data front, at 12:00 GMT, the German Trade Balance for October showed a surplus of 18.2B against the expected 18.7B and weighed on Euro. From the U.S. side, at 20:00 GMT, the Final Wholesale Inventories for October surged to 1.1% against the forecasted 0.9% and weighed on the U.S. dollar. The JOLTS Job Opening for October also rose to 6.65M against the expected 6.30M and supported the U.S. dollar that added further losses in EUR/USD pair.

The U.S. dollar was also strong onboard after the hopes for further stimulus package were diminished with the White House’s latest proposal. Steven Mnuchin submitted a proposal on Wednesday worth $916 billion. The offer included only $40 billion towards unemployment benefits that were far less than the amount proposed in the package from a bipartisan group of lawmakers worth $180 billion. Democrats rejected the proposal as they have been trying since the CARES ACT for additional financial aid for laid-off workers.

This new proposal from the Trump administration gave mixed signals in the market. Some believed that the stalemate between Republicans & Democrats would remain intact for long to reach a deal. Others believed that the White House has reengaged in talks for the first time since the election and that it was a positive sign that a compromise could be reached before the end of the year. All the stimulus uncertainty added strength to the U.S. dollar and weighed on the riskier EUR/USD pair on Wednesday.

Daily Technical Levels

Support   Resistance

1.2042     1.2131

1.2006     1.2184

1.1954     1.2220

Pivot point: 1.2095

EUR/USD– Trading Tip

The technical side of the EUR/USD continues to remain the same as the pair is trading at 1.2103 level, facing immediate resistance at 1.2160 and 1.2196 level along with a support level of 1.2085. Closing of candles below the 1.2103 level can send the EUR/USD pair further lower until 1.2080 and 1.2040. However, the focus is likely to stay on the ECB monetary policy decision, especially the Main Refinancing Rate, which is expected to remain unchanged. The choppy session is expected until the release of the ECB report.

 


GBP/USD – Daily Analysis

The GBP/USD pair was closed at 1.34060 after placing a high of 1.34778 and a low of 1.33455. The GBP/USD pair ended its day in positive territory on Wednesday and climbed above 1.34700 as the final round of talks between UK PM Boris Johnson and the European Commission President Ursula von der Leyen started.

Ahead of the talks, the U.K. Pm Boris Johnson said that the E.U. insisted on terms that no prime minister could accept in EU-UK trade talks. The PM said that a good deal was still there to be done as the E.U. sought an automatic right to retaliate against the U.K. if its labor and environmental standards diverge from theirs. PM Boris Johnson also said that the E.U. could not accept the U.K. as having sovereign control over its fishing waters after Brexit. Major disagreements remain over fisheries, business competition rules, and governance issues.

PM Boris Johnson said that a deal would not be possible if the E.U. insisted that if a new law is passed in the future and if the U.K. did not follow suit, then the E.U. wanted an automatic right to punish the U.K. and retaliate. He also claimed that the E.U. wanted the U.K. to become the only country in the world not to have sovereign control over its fishing waters. He said that he would not believe that any prime minister of this country could accept under these terms. However, German Chancellor Angela Merkel has said that a Brexit deal was still possible but insisted that the E.U. single market’s integrity must be respected.

On Wednesday, PM Boris Johnson arrived in Brussels to find common grounds on significant differences that have stalled the talks for eight months. Over the past couple of days, the optimism has increased that a deal might reach as both sides have successfully reached a post-Brexit arrangement in principle over the Irish border. This optimism kept the British Pound on the upside ahead of the talks and pushed the GBP/USD pair higher. Both sides have confirmed that these final talks’ decision will be revealed on Sunday, and this statement forced investors to lose some of its early daily gains.

Meanwhile, on the USD front, the U.S. dollar was strong across the board. The risk sentiment deteriorated, and safe-haven appeal emerged after the rising number of coronavirus cases posted global economic recovery threats despite the vaccine development. The total number of infections in the U.S. surpassed 15 million on Wednesday, and it was reported that almost 200,000 Americans were tested positive for coronavirus every day in the U.S.

Furthermore, the British Pound lost some of its gains in the late trading session on Wednesday after Britain’s top medical adviser warned people with significant allergies to avoid having Pfizer and BioNtech’s vaccine shots as they could give an adverse reaction. On Wednesday, two people were reported to have an adverse reaction to Pfizer’s coronavirus vaccine in Great Britain and weighed on the local currency that capped further gains in GBP/USD pair.

Daily Technical Levels

Support   Resistance

1.3301     1.3453

1.3236     1.3542

1.3148     1.3606

Pivot point: 1.3389

GBP/USD– Trading Tip

The GBP/USD is trading at 1.3378, holding below an immediate resistance level of 1.3395. On the higher side, the GBP/USD pair can lead to a 1.3437 level, and support stays at 1.3340, which is extended by an upward trendline. Overall it’s an ascending triangle, and it typically breaks on the higher side; thus, we can expect the GBP/USD price to move until 1.3435.


USD/JPY – Daily Analysis

The USD/JPY pair was closed at 104.231 after placing a high of 104.403 and a low of 104.050. USD/JPY pair extended its gains for the second consecutive day on Wednesday as the U.S. dollar gained traction on the day. The hopes for the second round of massive stimulus package from Congress decreased n Wednesday after the Trump administration came up with a new proposal. The U.S. Secretary State Steven Mnuchin submitted a new proposal for an economic relief package that would offer far fewer unemployment benefits than what has been offered by a bipartisan group of lawmakers.

The unemployment benefits for millions of jobless Americans would be delivered as $180 billion under the framework proposed by a bipartisan group of lawmakers. But in contrast to this, the new package submitted by the Trump administration included $40billion in new funding for unemployment benefits.

The bipartisan effort of $908 billion packages has brought the Democrats and Republicans closer to a compromise on a coronavirus package. However, the new White House proposal of $916 billion was a sharp rejection from Democrats as the White House’s proposal was strongly criticized by House Speaker Nancy Pelosi and Senate Minority Leader Charles E. Schumer in a joint statement.

Meanwhile, on Wednesday, the U.S. House of Representatives agreed on a one-week extension of federal government funding that would give lawmakers more time to agree on a massive coronavirus relief package. However, the Senate Majority leader Mitch McConnell said that lawmakers were still looking forward to a relief package.

These developments raised the uncertainty related to the U.S. stimulus package, supported the U.S. dollar, and supported the USD/JPY pair’s upward trend.

Meanwhile, on the data front, At 04:50 GMT, the Core Machinery Orders for October raised to 17.1% against the forecasted 2.6% and supported the Japanese Yen. The M2 Money stock for the year from Japan also raised to 9.1% against the estimated 8.9% and supported the Japanese yen that capped further gains in the USD/JPY pair.

On the U.S. front, at 20:00 GMT, the Final Wholesale Inventories for October rose to 1.1% against the anticipated 0.9% and weighed on the U.S. dollar. The JOLTS Job Opening for October also raised to 6.65M against the projected 6.30M and supported the U.S. dollar that added further gains in the USD/JPY pair.

Daily Technical Levels

Support   Resistance

104.10      104.44

103.90      104.60

103.75      104.79

Pivot point: 104.25

USD/JPY – Trading Tips

The USD/JPY has violated the symmetric triangle pattern at 104.346, and it opens further odds of buying until the 104.750 level. The pair has recently disrupted the sideways trading series of 104.200 – 103850. Now it’s trading at 104.300 level, especially after bouncing off over 103.700 level on the lower side, supporting the pair nearby 103.700 mark. On the downside, the USD/JPY may find support at the 103.200 level upon a bearish breakout of the 103.750 support level. While resistance stays at 104.700 today. Good luck

Categories
Crypto Market Analysis

Daily Crypto Review, Dec 10 – Bitcoin Bulls Back in the Game as Sector Recovers From The Dip

The cryptocurrency sector is mostly green as cryptocurrencies took the day to recover from the sudden drop that occurred on Dec 8. Bitcoin is currently trading for $18,411, representing an increase of 1.25% compared to our last report. Meanwhile, Ethereum’s price has increased by 3.37% on the day, while XRP managed to gain 4.66%.

 Daily Crypto Sector Heat Map

WinCash gained 207.65% in the past 24 hours, making it the most prominent daily crypto gainer by far. It is followed by Nyan V2’s 181.02% and Pamp Network’s 172.94% gain. On the other hand, DMme lost 68.63%, making it the most prominent daily loser. It is followed by ALL BEST ICO’s loss of 64.69% and Moonday Finance’s loss of 54.48%.

Top 10 24-hour Performers (Click to enlarge)

Bottom 10 24-hour Performers (Click to enlarge)

Bitcoin’s market dominance has moved to the downside just under half a percent since we last reported, with its value currently being 62.6%. This value represents a 0.4% difference to the downside compared to the value it had when we last reported.

Daily Crypto Market Cap Chart

The cryptocurrency sector capitalization has increased significantly in the past 24 hours, with its current value being $546.31 billion. This represents a $10.23 billion increase when compared to our previous report.

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What happened in the past 24 hours?

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Technical analysis

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Bitcoin

Bitcoin has spent the day slowly moving up after a sharp price descent, which brought it to $18,000. After establishing itself above $18,190, Bitcoin even tried to push further up above $18,600 but failed almost instantly, making its price go back to previous levels.

We want to point out (once again) Micheal van de Poppe’s call of a large CME gap looming between $18,275 and $16,995.

Due to the amount of support/resistance levels Bitcoin currently has, any push towards either the upside or downside could be a possible safe trade in the same direction.

BTC/USD 2-hour chart

Bitcoin’s daily, weekly, and monthly technicals are completely tilted towards the buy-side and show no bearish signs. Its 4-hour overview, however, is completely bearish.

BTC/USD 1-day Technicals

Technical factors (4-hour Chart):
  • Price is below both its 50-period and 21-period EMAs
  • Price is between its middle and bottom Bollinger band
  • RSI is has recovered from being oversold (43.38)
  • Volume is slightly above average
Key levels to the upside          Key levels to the downside

1: $18,600                                 1: $18,190

2: $18,790                                 2: $17,780

3: $19,000                                  3: $17,200

Ethereum

Ethereum has not only recovered from its drop to $530, where it hit the ascending (red) trend line but pushed back towards $600. Even though the price is not yet ready to tackle this resistance level, it has made an attempt to break the $581 level but failed and returned to the $565 one.

Ethereum traders should pay attention to whether the cryptocurrency will end up above or below $565, which may be an indicator of its short-term movement. Traders should also pay attention to Bitcoin’s movement whenever taking a trade with Ethereum.

ETH/USD 2-hour Chart

Ethereum’s daily and monthly technicals are completely tilted towards the buy-side and show no signs of bearishness. However, its 4-hour overview is completely bearish, while its weekly overview is bullish but shows slight neutrality as well.

ETH/USD 1-day Technicals

Technical Factors (4-hour Chart):
  • Price is below both its 50-period and 21-period EMAs
  • Price is slightly below its middle Bollinger band
  • RSI has recovered from being in the oversold territory (42.83)
  • Volume is slightly above average
Key levels to the upside          Key levels to the downside

1: $565                                     1: $550

2: $581                                      2: $525 

3: $600                                      3: $510

Ripple

XRP made a sharp (to the upside) price recovery as well, with its price pushing past $0.5435, as well as its $0.57 resistance (now support) levels. The fourth-largest cryptocurrency by market cap even tried to break $0.6 but got shut down swiftly. Its price is now consolidating slightly above $0.57 and showing no signs of potential dips.

XRP traders (finally) have the option to trade this cryptocurrency after several days of close-to-no volatility. Keeping track of Bitcoin’s movements when trading XRP is a must, as any change in Bitcoin’s price could change the outlook of the market as a whole.

XRP/USD 2-hour Chart

XRP’s daily, weekly, as well as monthly technicals, are completely tilted towards the buy-side and show no signs of neutrality or bearishness. Its 4-hour overview, on the other hand, is bearish with slight signs of neutrality.

XRP/USD 1-day Technicals

Technical factors (4-hour Chart):
  • The price is currently slightly below both its 50-period EMA, as well as its 21-period EMA
  • Price is slightly below its middle Bollinger band
  • RSI is neutral and recovered from being oversold (47.26)
  • Volume is slightly above average
Key levels to the upside          Key levels to the downside

1: $0.57                                   1: $0.5435

2: $0.6                                       2: $0.5

3: $0.63                                    3: $0.475

Categories
Forex Elliott Wave Forex Market Analysis

GBPUSD Ending Diagonal Completion a Warning Sign for a Trend Reversal?

In our last GBPUSD analysis, we discussed its upward advance in an incomplete ending diagonal pattern. We said that the terminal Elliott wave formation progressed in its fifth wave of Minuette degree identified in blue that belongs to a wave ((c)) of Minute degree labeled in black. Likewise, the wave ((c)) corresponds to the third internal segment of the wave B of Minor degree identified in green. 

Technical Overview

The big picture unveiled the sideways movement in an incomplete corrective formation, which could correspond to an expanding flat pattern. In this regard, after the completion of wave B, the Sterling should start developing wave C, which should lead to a decline of this major pair in a five-wave internal sequence.

On the other hand, the following 8-hour chart reveals the market participants’ sentiment unfolded by the 90-day high and low range, which looks advancing in the extreme bullish sentiment zone. 

The previous chart illustrates the bullish failure in the Wednesday trading session, which couldn’t strike the last high of 1.35394. This failure added to the breakdown of the previous upward trendline plotted in green leads us to expect further declines in the coming trading sessions, likely to the ascending primary trend-line identified in blue.

Short-term Technical Outlook

The intraday Elliott wave view for the GBPUSD pair displayed by the following 2-hour chart exposes the breakdown of the ending diagonal pattern formed on December 07th, confirming the completion of the terminal formation unveiled in the wave ((c)) identified in black. 

Once the Pound found the intraday support at 1.32238, the price action began to bounce in an internal corrective rally subdivided in a three-wave sequence corresponding to wave ((ii)) in black, founding resistance at 1.34779 on the Wednesday trading session.

In this regard, the breakdown of the intraday trend-line that connects the waves ((i)) and (b) should confirm the downward progress of its wave ((iii)) in black, which according to the Elliott wave theory, should be the largest wave of the downward sequence.

The third wave in black could find support in the demand zone between 1.31296 and 1.31064. If the price action continues deteriorating, the Cable could drop toward the next demand zone between 1.29843 and 1.29144.

Summarizing

After the GBPUSD pair made a breakdown of its ending diagonal pattern, is currently moving in a corrective rally corresponding to wave ((ii)), which should give way to a new decline corresponding to the third wave of Minute degree. According to the textbook, this movement should be the largest decline of the current downward sequence and could find support in the demand zone between 1.31296 and 1.31064. Finally, the invalidation level of the current bearish scenario can be found at 1.35394.

Categories
Forex Fundamental Analysis

USD/JPY Global Macro Analysis – Part 3

USD/JPY Exogenous Analysis

In the exogenous analysis, we will analyze economic indicators that exhaustively compare the performance of the US and the Japanese economies. These factors impact the dynamic of the USD/JPY pair in the forex market. They include:

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

US and Japan interest rate differential

The interest rate differential is the difference between the interest rate in the US and that of Japan. Investors would prefer to invest their funds in a country that offers higher returns. Furthermore, carry traders are often bullish on the currency with a higher interest, which ensures that they earn higher yields.

The Bank of Japan has kept the interest rates at -0.1% since 2016. The current federal funds rate in the US is 0.25%. Thus, the interest rate differential for the USD/JPY is 0.35%. Since there are no foreseeable changes in the interest rates in either country, we assign it an inflationary score of 2.

Balance of trade

Balance of trade determines whether a country has a trade surplus or deficit in international trade. A trade surplus results from a country’s exports being of higher value than that of its imports. A deficit occurs when the imports are of higher value than exports. Japan mostly exports machinery and electronics, which puts it at a significant advantage due to the value of these goods. On the other hand, the US is a net importer.

In October 2020, japan has a trade surplus of ¥872.9 billion, which has been steadily increasing since June. The US has a trade deficit of $63.9 billion, which has been growing throughout the year.

The balance of trade differential between the US and Japan has been widening in favor of Japan. Based on our correlation analysis with the USD/JPY, we assign it a score of -6. It means that if this trend persists, we expect the USD/JPY to be bullish in the near term.

The difference in the GDP growth in the US and Japan

Although the US has a higher GDP than Japan, we can compare the two economies based on their growth rates.

The US economy had a GDP growth rate of 33.1% in Q3 2020, while Japan’s economy expanded by only 5%. The US economy is seen to be expanding at a faster pace than that of Japan. Based on the correlation with the price of the USD/JPY pair, we assign an inflationary score of 2. This means that we should expect a bullish trend on the USD/JPY pair if the US economy keeps expanding faster than that of Japan.

Conclusion

The total score from the exogenous analysis of the USD/JPY pair is -2. This implies that in the near term, we should expect a bearish trend in the pair.

Technical analysis of the USD/JPY pair shows that the weekly chart is still trading way below the 200-period MA. Furthermore, the pair has failed to successfully breach the middle Bollinger band, which has served as its resistance level. All the best!

Categories
Forex Fundamental Analysis

USD/JPY Global Macro Analysis – Part 1 & 2

Introduction

Global macro analysis of the USD/JPY pair involves the analysis of endogenous factors that impact both the USD and the JPY; and exogenous analysis for the USD/JPY pair.

In the endogenous analysis, we’ll focus on domestic macroeconomic factors that drive the domestic growth in the US and Japan. The exogenous analysis will involve the analysis of global macroeconomic factors that define the dynamics of the USD/JPY pair.

Ranking Scale

We will rank both the endogenous and the exogenous factors on a sliding scale of -10 to +10. Whenever the ranking is negative, it means that the macroeconomic indicator led to the depreciation of the currency. A positive ranking means that the indicator had an inflationary impact.

USD Endogenous Analysis – Summary

A score of -19.1 implies a clear deflationary effect on the US Dollar. This means that USD has lost its value since the beginning of 2020, according to these indicators.

You can find the complete USD Endogenous Analysis here.

JPY Endogenous Analysis – Summary

The endogenous analysis for the Japanese economy resulted in an overall inflationary score of 3. Based on this analysis, we can expect that the JPY had appreciated marginally in 2020.

  • Japan Inflation Rate

The inflation rate in Japan is measured by the consumer price index  (CPI). The CPI weights various consumer expenditures depending on their level of importance. Food is weighted at 25%, Housing 21%, transport and communication 14%, recreation 11.5%, energy and water 7%,  medical care 4.3%, and clothing 4%.

A higher rate of inflation is necessary for economic growth. It also forestalls a possible interest rate hike, which is accompanied by currency appreciation.

In October 2020, the MoM inflation rate in Japan decreased by 0.1% constant change since August. The YoY inflation rate decline by 0.4%, the first decline in about four years.

Based on our correlation analysis, we assign Japan’s inflation rate, a deflationary score of -2.

  • Japan Unemployment Rate

The unemployment rate measures the number of Japanese citizens eligible for employment who are currently seeking gainful employment opportunities.

An increasing rate of unemployment means that more jobs are lost in the economy faster than new jobs are being created. That’s an indicator that the economy is contracting.

In October 2020, Japan’s unemployment rate increased to 3.1%, representing 21.4 million people, the highest recorded since May 2017.

Due to the high correlation between the unemployment rate and GDP, we assign it a score of -5.

  • Japan Manufacturing PMI

The Japan manufacturing PMI is also known as the Jibun Bank Japan Manufacturing PMI. The PMI is compiled through a series of monthly questionnaires surveying about 400 manufacturers. The manufacturers are segregated depending on their industry’s contribution to GDP, and their responses aggregated into a diffusion index. When the index is above 50, it means that the manufacturing activity increased while a below 50 reading implies a slow-down in the manufacturing sector.

Japan is a highly industrialized economy, and its manufacturing activities have a high correlation with its GDP growth rate.

In November 2020, the Japan Manufacturing PMI was 49, inching closer to the highest recorded 49.3 in January. Since the manufacturing PMI has been steadily increasing from the lows of 38.4 in May, we assign it an inflationary score of 6.

This PMI is also known as Jibun Bank Japan Services PMI. It is a survey of over 400 services companies operating in the Japanese services industry. A Survey of the purchasing managers is used to track industry changes in employment, inventories, sales, and prices. Sectors covered by the survey include transport and communication, personal services, financial services, hotel industry, and IT. The responses are weighted based on the sector’s size and aggregated into an index from 0 to 100.

When the index is above 50, it signals that there is an expansion in the services industry, while below 50 shows contraction.

In November 2020, the Japan services PMI dropped to 46.7 from 47.7 in October. Although the index is above the lows of 21.5 recorded at the height of the coronavirus pandemic, it is still lower than the levels observed in the pre-pandemic period.

Based on our correlation analysis, we assign Japan services PMI an inflationary score of 2.

  • Japan Retail sales

The monthly retail sales measure the change in the value of goods consumed directly by households. In any economy, the growth in GDP is primarily driven by the demand by households. Thus, retail sales can be considered a significant indicator of economic growth.

In October 2020, the MoM retail sales in Japan increased by 0.4%, while YoY retail sales increased by 6.4%. The increase in October is the first time the YoY retail sales have increased since February. This shows demand in the Japanese economy is growing after the easing restrictions implemented in the wake of the pandemic.

Due to its high correlation with the GDP, we assign Japan retail sales an inflationary score of 5.

  • Japan General Government Gross Debt to GDP

This is the ratio between the amount of debt, both domestic and foreign, that the Japanese government has accumulated to national GDP. Typically, lenders use this ratio to determine if a country’s economy is overly leveraged and if the government might default in the future.

Note that Japan has the largest national debt to GDP in the world. However, although it is heavily indebted, unlike many other countries, Japanese debt is denominated in Yen. More so, foreigners only hold about 6.5% of the total debt. That is why Japan can continue to accumulate such massive debts without any fears of hyperinflation or default risks. But that doesn’t mean that the debt isn’t weighing down on the economy.

In 2019, the Japan national debt to GDP was 238%, an increase from 236.6% in 2018. In 2020, it is projected to exceed 240% due to the measures implemented to fight the pandemic. Based on our correlation analysis, we assign it a deflationary score of -3.

Please check our next article to find the Exogenous analysis of both USD and JPY currencies. We have also come to a conclusion on whether you should expect a bullish or bearish trend in this pair.

Categories
Forex Videos

Position Sizing Part 12 – Two Tier Optimal F – I

Position Sizing XII- Two-Tier Optimal f Part I

 

In our past video presentation about the Kelly Criterion and Optimal f position sizing methods, we have learned that using these position size methods bring the maximal growth factor to any trading account using a profitable strategy. But, optimal fraction position sizes also presented drawdowns of over 90%, making them unsuitable for any trader except for a robot.

Nevertheless, optimal fraction position size shows the fastest growth rate, meaning achieving a determined goal in minimal time. Consequently, if we were to devise a methodology to reduce drawdown at tolerable levels, diminishing the risk of ruin to zero, and boost the basic 1-percent risk equity progression to unseen levels, we could take advantage of a terrific methodology and produce psychologically acceptable growth optimization.  That is the object of the current video presentation. 

To make this analysis, we used the currently available data from our Live trading signals. That way, our study is as close to a real system as it can be. 

At the time of this writing, we have delivered 203 signals since March 20. Thus, about 51 signals per month, that is, 2.5 signals per trading day. The general statistics were:

STRATEGY STATISTICAL PARAMETERS: 
 Nr. of Trades        : 203.00
 Percent winners      : 65.52%
 Profit Factor        : 2.10
 Average Reward Ratio : 1.11
 Sample Statistics:      
 Mathematical Expectation : 0.3800
 Standard dev            : 1.3682
VAN K THARP SQN           : 2.7774

To find the safest optimal f, we did a Monte Carlo resampling of the original trade sequence. The resampling was done with what would have been one trading year using 10,000 resamples, supplying us with 10,000 years of synthetic market activity.

The resulting optimal fractions were plotted and shown below. We can see a Gaussian bell curve centered at 0.62.

But the average f is not a safe fraction because 50% of the values lie below the average. We seek an optimal f that guarantees as much as possible that no future values lie below it.

Opt f Key Values   
       max: 91.33%
   average: 62.58%
       min: 23.57%

Thus, to be safe, we want the minimum f, which is 23.57%. 

The Live Trade Signals using a fixed 1% risk per trade

To create a reference from which to compare our proposal, we have computed what would have been four years of trading activity using our Live Signals

The next figure shows the equity curves resulting from the 10K resamples, corresponding to a 1% dollar risk on each trade and over what would have been approximately one year of activity.

We see that starting with $10,000, the end capital of the equity curves range from $19,967 up to over $140,000, although the average ending capital is $53,122.

      Average ending Capital : 53,122.77
          Max ending Capital : 154,077.50 
           Min ending Capital: 19,967.23

 

From these data, we can also create an interesting statistic to answer the question of how many trades are needed to reach a determined goal. In this case, we present the Trades to reach 10X. The curve results from computing this value on all 10K equity curves and computes the odds relative to the number of trades.

In the case of the 1% risk, we see that the average time to reach 10X, the initial capital is about 650 trades, with a minimum of 400 days and a maximum of 1000 days. Not bad at all. But that can be improved dramatically using a mix of conservative and aggressive position sizing.

The optimal F Positioning Strategy

Using the optimal f positioning strategy, a bold investor will navigate in the turbulent waters of one of these equity curves:

The chart is on a semi-log scale because the range of values is too vast to handle on a linear chart. We see that the y-axis show scientific notation, but do not fret. The number of trailing zeros of the equity corresponds with the last digit is in superscript. For instance, in the previous figure, we see that the ending capital after one year of trades ranges from below $1,000 to a theoretical value with 22 trailing zeros.

The next figure shows the cumulated probability of reaching a certain number of trailing zeros:

We observe that a small portion of the equity curves end below 4 digits, meaning they are net losers.  The following data clarifies this by showing relevant figures:

      Average ending Capital : 517.14 billion
          Max ending Capital : 43,096,478,975,341.38 billion 
           Min ending Capital: 153.51
     Capital ending above 517 billion : 55.63 % of the equity curves
     Capital ending above 1 million :  92.51 %
     Capital ending above 100,000 : 92.96 %
     Capital ending below 10,000 :  6.8507 %
     Capital ending below 5,000 :  3.4253 %

And, next, the chart that shows the power of trading using optimal f. The chart shows the time to reach 10X the initial capital,

The graph shows that the average time to reach 10X growth (50% probability) went from about 620 days down to 42 days. The same growth achieved in one-tenth of the time!

The Two-tier risk system.

The proposed system aims to profit from the rapid growth of an optimal fraction position sizing while minimizing the risk of blowing up the account. In this video, we will outline the idea and, in the following videos, will present its results and also the optimal requirements to make it work and minimize the risk.

The critical value here is the percentage of times the optimal f ends below 10K in a determined period.  Here we will take 80 trades instead of one-year of trading, as this shows a more realistic use in a Two-tier system.

40-trade figures:

    Average ending Capital : 213,793 
        Max ending Capital : 5,127 billion 
         Min ending Capital: 154

     Odds of

             Ending above 46,474    : 51.74 %
             Ending above 1,000,000 : 29.61 %
             Ending above 100,000   : 62.82 %
             Ending below 10,000    : 13.35 %
             Ending below 5,000     : 10.40 %

The key idea is based on the odds of the trading capital ending below the initial 10K value. In the case of sequences of 80 trades, we see that the odds are roughly 13.3%, and the odds of ending below 50% of the original figure is just 10.4%. 

That is the risk for the opportunity to have an average of $213,793 ending capital, which is over 21X. The risk/ reward ratio of the proposition is 214/5, which is 43. That means we can be wrong up to 42 times and recover after just one good trading sequence. Our initial proposal is to take 1/4 of the capital to allocate for an opt f positioning strategy.

The Two-tier optimal f proposal 

  1. Take 25% of your current trading balance and use it for the optimal f strategy. Use the rest 75% for 1% risk trades or let it be in cash. (more variations possible)
  2. Let computations of the optimal f strategy be separated in its own pocket to compute the subsequent trades.
  3. The account will be rebalanced after a determined goal has been achieved or goes below a predetermined level ( in our case, we will rebalance if the Optf part drops below ¼ of the initial capital on each cycle).
  4. After rebalancing, a new cycle of 25%-75% allocation begins.

In our next video, we will deal with the results and trade parameters of this combined strategy, as well as our advice on which features are desirable to make this strategy optimal.

 

Categories
Forex Course

188. Straddle Trading Strategy – An Efficient Way To Trade The News

Introduction 

In the previous lesson, we covered how you can make money if you knew the direction the market was going to move. In this lesson, we will show you how you can make money if you have no idea about the direction the market is going to move.

When there is high volatility in the market, especially as a result of a news release, it is possible to achieve this. Note that this strategy is different from trading with a directional bias.

Let’s break it down!

Firstly, you have to aware of an upcoming high-impact news release. Unlike trading with a directional bias, you don’t have to familiarise yourself with the direction the news will move the market. All you have to know is that the market will significantly move.

Let’s say, for example, that a news release is scheduled for 8.30 AM. Using the 5-minute timeframe, observe the trend for the past 30 minutes and establish the support and resistance levels. You will use these levels to set a buy stop and sell stop order.

With the buy stop orders, if the price breaks above the resistance level, a long order will be triggered. In the sell stop order, if the price breaks below the support level, a sell order will be triggered. Let’s use the news release of the US unemployment rate on October 2, 2020, at 8.30 AM EST.

Here’s the logic behind the straddle strategy. If the news is significant enough to break through the support level, then it is plausible for the bullish trend to continue in the short term. Conversely, if the news release is significant enough to blow the price past the support level, then the bearish trend might progress in the short-term.

Note that you can pre-set your ‘take profit’ and ‘stop-loss’ levels when using the forex pending order types. Doing this ensures that you get to determine your absolute downside in case a trend doesn’t hold. Furthermore, you can opt for only the ‘trailing stop order’ alongside the stop orders. Your ‘stop-loss’ value is not fixed with the trailing stop, which increases your exposure to the upside.

For instance, if, in the above example, we had set our take profit level at ten pips, we would have only made the ten pips. But, if we used the trailing stop order instead, we would have gained more than the ten pips. Cheers!

[wp_quiz id=”98844″]
Categories
Crypto Daily Topic Forex Daily Topic Forex Videos

Position Sizing Part 1 Drawdown – Why You Keep Blowing Your Account!


Position Sizing. Drawdown- The dark side of Trade

 

This video will be dedicated to explaining the relation between performance and drawdown.  It is an essential topic since most of the trading community ignores the fact that the drawdown of a trading strategy or system is not an independent value. It is position sizing dependent. Furthermore, the profitability of a trading system is also dependent on the size of the position.

Imagine several investors trying to choose a copy-trading service, and you need to rank the potential candidates. Which parameter do you think most of them would choose to grade the quality of that group of systems?  Total returns? Average trade return? Percent winners? Drawdowns?

The majority would rank them by total returns, without any further analysis on how the returns were obtained. This could lead them to select the worst candidate instead. 

The fact is that returns and risks are interlinked in all investments.  You cannot increment returns without increasing the risk. Consequently, traders and investors must analyze both simultaneously.

Let’s look at the characteristics of returns vs. drawdown using a simple position sizing method applied to the trades of one year using a sound system such as our Live Signals Service. 

Let’s see first how this system behaves using just one mini-lot size, which corresponds to $1 per pip gained or lost. 

The figure corresponds to a trader having $1,000 initial capital, using a constant one micro-lot trade. To compute the maximum drawdown, we created 10,000 synthetic account paths using Monte Carlo resampling. The corresponding max drawdown distribution is shown below.

The Average Max Drawdown is 1.94 % with a very tiny possibility a 8% drawdown.

Let’s see how this system performs under increasing lot sizes:

1 mini-lot size

The corresponding drawdown curve  is shown below:

In this case, the average max drawdown goes to 11.77%. But, there is a 30% chance (about one in three) that max drawdown goes to 20%, and in about 2.5% of the occasions, the max drawdown went as high as 40%.

Let’s use now one lot

And the corresponding max drawdown curve is

In this case, the average max drawdown is 40%, but there is a 20% chance of a 65% drawdown and a 5% chance of an 85% drawdown.  40% drawdown is about the limit a usual trader can endure, but inevitably a 65% drawdown would force most traders to stop trading, even when we can see that the system is profitable.

We can see that even using a constant trading size, the drawdown grows with the position size. Of course, we can observe that the returns also grow. Furthermore, profits grow at a much higher rate than risk.  From the preceding examples, any astute observer can notice that moving from one micro-lot to one lot, 1-year returns went from $1,158 to $115,840, a 100X increment, while the drawdown moved from about 2% to 40%, a 20X increase.  

Therefore, the theory behind position sizing is aimed at optimizing both return and drawdown. Of course, there is no single solution to this problem. The solution must fit the particular psychology of the trader. 

Categories
Forex Signals

USD/CHF Violates Descending Triangle Pattern – Brace for a Sell Signal! 

During Wednesday’s trading session, the USD/CHF currency pair failed to stop its previous-day bearish bias and remained pessimistic around below the 0.8900 level. However, the reason for the bearish tone around the currency pair could be associated with the broad-based U.S. dollar weakness. The U.S. dollar was being pressured by the optimism over the potential vaccine for the hazardous coronavirus infection, which urges investors to retreat from the safe-haven assets. 

Apart from this, the U.S. dollar losses could also be attributed to the on-going concerns of further monetary easing by the U.S. Federal Reserve, which adds burden around the U.S. dollar and contributes to the currency pair losses. On the contrary, the upbeat market sentiment boosted investors’ confidence and undermined the safe-haven Swiss Franc, which, in turn, was seen as one of the leading factors that help the USD/CHF currency pair to limit its deeper losses. Currently, the USD/CHF currency pair is currently trading at 0.8879 and consolidating in the range between 0.8871 – 0.8897.

The equity market had been flashing green since the Asian session started. The reason could be associated with the major positive catalysts. Be it the renewed probabilities of the U.S. aid package or optimism over treatment for the highly infectious coronavirus, both factors have favored the market trading sentiment. Therefore, the risk-on market mood tends to undermine the safe-haven Swiss franc, which becomes the key factor that lends some support to the currency pair to ease the intraday bearish pressure surrounding the USD/CHF currency pair.

The hopes of potential vaccines were further boosted after the U.K.’s has started vaccination, witnessed after the 1st-patients inoculated with BNT162b2, the COVID-19 vaccine co-developed by Pfizer (NYSE: PFE) and BioNTech SE (F:22UAy). In addition to this, the sentiment around the equity market was improved further after House Speaker Nancy Pelosi told that the stimulus discussions had made good progress. Meanwhile, the U.S. Treasury Secretary Steve Mnuchin offers a larger amount than the previously highlighted $908 billion for the stimulus package. 

At the USD front, the broad-based U.S. dollar failed to stop its bearish trend and remained depressed on the day as doubts persist over the U.S. economic recovery from COVID-19. Besides this, the risk-on market sentiment, backed by the optimism over a potential vaccine for the highly contagious coronavirus disease, also played its major role in undermining the safe-haven U.S. dollar. Besides this, the U.S. dollar losses could also be attributed to the concerns of further monetary easing by the U.S. Federal Reserve, which tends to undermine the American currency. However, the losses in the U.S. dollar becomes the key factor that kept the currency pair lower. Meantime, the U.S. Dollar Index, which tracks the greenback against a bucket of other currencies, dropped to 90.778.

Conversely, the optimism around the equity market was slightly unaffected by the intensifying market worries regarding the continuous surge in new coronavirus cases in the U.S. and Europe, which fueled the global economic recovery concerns imposing new lockdown restrictions on economic and social activity. Furthermore, the equity market gains were also capped by the lingering uncertainty over the Brexit deal and intensified China-US tussles over the U.S. sanctions on Chinese diplomats and the arrest of the Hong Kong opposition party members by police.

Moving ahead, the market traders will keep their eyes on the U.S. stimulus headlines and vaccine news. In the meantime, the updates surrounding the Brexit trade talks and the Sino-US tussle could not lose their importance on the day.

Daily Support and Resistance

S1 0.8767

S2 0.8839

S3 0.8874

Pivot Point 0.8911

R1 0.8946

R2 0.8982

R3 0.9054

Technically, the USD/CHF pair is gaining support above the 0.8875 mark, and it’s triggered an upward wave to achieve a 23.6% Fibonacci retracement mark of 0.8935. On the further higher front, an upward movement and violation of 0.8933 mark can drive more buying trend unto next Fibo level of 61.8% at 0.8965. However, the pair has formed a descending triangle pattern which, if violated, can send the pair until the 0.8835 level. Check out a trading plan below. 

Entry Price – Sell 0.88778

Stop Loss – 0.89178

Take Profit – 0.88378

Risk to Reward – 1:1

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

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

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

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

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

Categories
Forex Market Analysis

Daily F.X. Analysis, December 09 – Top Trade Setups In Forex – Brace for BOC Policy! 

On the news front, the economic calendar is filled with the Bank of Canada’s policy rate. The BOC is expected to keep the Overnight Rate rate unchanged at 0.25%, which is likely to drive no major change in the Loonie. The BOC Rate Statement will be worth watching to determine further moves in CAD.

Economic Events to Watch Today  

 


EUR/USD – Daily Analysis

The EUR/USD closed at 1.21044 after placing a high of 1.21337 and a low of 1.20952. EUR/USD pair fell on Tuesday for the third consecutive session but remained under consolidation in a tight range. The EUR/USD pair avoided major losses as the Euro remained appealing due to broad weakness in the U.S. dollar. The U.S. Dollar Index fell to its two and a half years lowest level on Tuesday and capped further losses in the EUR/USD pair. The U.S. dollar was weak on Tuesday as the country crossed the threshold of 15 million coronavirus cases, which was the world’s highest total. American hospitals braced to ration care amid staff shortages and warned about the rampant spread of the disease.

Pennsylvania’s governor Tom Wolf said that the coronavirus was running extensively throughout the state and could soon reach the level where hospitals will begin turning away patients. He also said that additional pandemic restrictions might be on controlling the spread of the virus.

Meanwhile, the talks for the second round of coronavirus relief stimulus between Democrats and the Republicans and the agreement of both parties over the bipartisan proposal of a $908 billion stimulus package also weighed on the U.S. dollar. Due to stimulus hopes and the rising number of coronavirus cases, the weak U.S. dollar capped further downside in the EUR/USD pair on Tuesday.

On the data front, at 11:30 GMT, the French Final Private Payrolls for the quarter raised to 1.6% against the expected -1.0% and supported the single currency Euro. At 12:45 GMT, the French Trade Balance showed a deficit of -4.8B against the expected -5.5B and supported Euro. At 15:00 GMT, the quarter raised the Final Employment Change to 1.0% against the forecasted 0.9% and supported Euro. The Revised GDP for the quarter dropped to 12.5% against the expected 12.6% and weighed on Euro. The ZEW Economic Sentiment raised in December to 54.4 against the estimated 37.5 and supported Euro. The German ZEW Economic Sentiment also surged to 55.0 from the projected 45.9 and supported Euro.

From the U.S. side, at 01:00 GMT, the Consumer Credit for October fell to 7.2B against the projected 17.6B and weighed on the U.S. dollar and capped further losses in EUR/USD pair. At 16:00 GMT, the NFIB Business Index fell to 101.4 against the estimated 102.6 in November and weighed on the U.S. dollar that capped further losses in the EUR/USD pair.

At 18:30 GMT, the Revised Nonfarm Productivity for the quarter declined to 4.6% against the expected 4.9% and supported the U.S. dollar and supported the downward momentum in EUR/USD pair. The Revised Unit Labor Costs for the quarter came in as -6.6% against the estimated -8.9% and supported the U.S. dollar. 

At 20:00 GMT, the IBD/TIPP Economic Optimism came in as 49.0 in December compared to the previous 50.0.

Moreover, the Euro remained comparatively appealing due to a more optimistic outlook of the Eurozone’s economy than the U.S. that capped further losses in the EUR/USD pair. The ECB’s policy decision is scheduled for Thursday. If the ECB takes a more hawkish tone, then Euro will rise and vice versa.

Daily Technical Levels

Support   Resistance

1.2086        1.2125

1.2071       1.2149

1.2046       1.2165

Pivot point: 1.2110

EUR/USD– Trading Tip

The EUR/USD is trading at 1.2127 level, finding an immediate resistance at 1.2160 and 1.2196 level along with a support level of 1.2085. Closing of candles underneath the 1.2103 level can send the EUR/USD pair further lower until 1.2080 and 1.2040. However, the focus is likely to stay on the German Trade Balance, which is due during the European session. Choppy session expected until economic figures show major deviations. The MACD is mixed, suggesting bearish; therefore, the idea will be to open a sell trade below the 1.2175 level today to capture quick green pips. 


GBP/USD – Daily Analysis

The GBP/USD pair closed at 1.33564 after placing a high of 1.33935 and a low of 1.32894. The GBP/USD pair fell on Tuesday for the third consecutive day amid the rising Brexit uncertainty that took its toll on British Pound. The mixed comments from various officials from both sides raised the uncertainty in the market related to the Brexit deal and weighed on British Pound. The British Cabinet Minister Michael Gove announced that they had reached an agreement in principle. The E.U.’s chief negotiator Michel Barnier told European ministers that a deal’s chances were very thin. At the same time, German Minister Michael Roth said there was no substantial progress in the trade talks between the E.U. and the U.K. He added that it was uncertain whether Britain and the E.U. could reach a trade deal.

All this uncertainty in the market weighed on the British Pound and dragged the pair GBP/USD on the downside. Another factor involved in the GBP/USD pair’s downward momentum was the latest move by the U.K. government to drop parts of its controversial internal market bill that paved the way for both sides to meet in Brussels on Wednesday to settle an agreement.

The U.K. government reached a post-Brexit arrangement in principle over the Irish border with the European Union after agreeing to ditch the most controversial parts of its internal markets bill. On Tuesday, the U.K. government said that it would abandon all the Brexit clauses relating to Northern Ireland in the internal market bill in exchange for promises by the E.U. to minimize checks and control due to being imposed on food and medicines going into Northern Ireland from Great Britain from January 01.

A deal on Ireland is reached between the E.U. and the U.K. it was not one of the key sticking points that have held the Brexit talks hostage. The Brexit talks will enter a last decisive phase from Wednesday as the PM Boris Johnson has prepared to travel to Brussels on that day to secure a deal over the European Union’s relations with the U.K. If he failed to reach an agreement with the E.U. It would mean that from the start of next year, the tariffs would be applied to some trade between the U.K. and the E.U. for the first time in almost half a century. U.K. sends almost 43% of its exports to the trade bloc E.U. and tariffs on its exports will be harmful to its economy. Failure to reach a deal will also end many cooperation types between the U.K. and the E.U. over crime, security, and travel.

The British Pound remains under pressure on Tuesday ahead of the final round of talks between PM Johnson and E.U. Commission President Ursula von der Leyen on Wednesday. On the data front, at 05:01 GMT, the BRC Retail Sales Monitor for the Year raised to 7.7%against the forecasted 5.0% and supported British Pound, and capped further losses in GBP/USD pair.

From the U.S. side, at 01:00 GMT, the Consumer Credit for October declined to 7.2B against the estimated 17.6B and weighed on the U.S. dollar. At 16:00 GMT, the NFIB Business Index declined to 101.4 against the expected 102.6 in November and weighed on the U.S. dollar.

At 18:30 GMT, the Revised Nonfarm Productivity for the quarter fell to 4.6% against the expected 4.9% and supported the U.S. dollar. The Revised Unit Labor Costs for the quarter came in as -6.6% against the projected -8.9% and supported the U.S. dollar. At 20:00 GMT, the IBD/TIPP Economic Optimism came in as 49.0 in December compared to the previous 50.0.

Daily Technical Levels

Support   Resistance

1.3297       1.3400

1.3242       1.3448

1.3193       1.3504

Pivot point: 1.3345

GBP/USD– Trading Tip

The GBP/USD is trading at 1.3378, holding below an immediate resistance level of 1.3395. On the higher side, the GBP/USD pair can lead to a 1.3437 level, and support stays at 1.3340, which is extended by an upward trendline. Overall it’s an ascending triangle, and it typically breaks on the higher side; thus, we can expect the GBP/USD price to move until 1.3435.


USD/JPY – Daily Analysis

The USD/JPY pair closed at 104.161 after placing a high of 104.204 and a low of 103.953. The pair posted gains on Tuesday as the market’s risk sentiment improved due to a combination of factors.

The news that Great Britain has started using the Pfizer vaccine on patients from Tuesday increased the risk-on sentiment as the hopes for economic recovery increased. Another factor involved in the rising risk-on sentiment was the rising hopes that the U.S. will soon deliver the second round of stimulus measures.

On late Monday, the Chinese Foreign Minister, Wang Yi, said that Beijing was open to restarting its relationship with the U.S. He also declared that both countries were at a critical historical stage after a year of intensifying tensions. Wang said that U.S. policy on China needed to return to objectivity and rationality. He also said that both sides should struggle to restart the dialogue and get back on the right track and rebuild mutual trust in the next Sino-US relations phase. Wang blamed the growing division between the world’s two biggest economies on some Americans with outdated Cold War mentality and ideological preconceptions. All these developments in vaccine usage, rising hopes for stimulus, and the U.S. and China relationship raised the risk sentiment that weighed heavily on the safe-haven Japanese Yen that ultimately supported the USD/JPY pair on Tuesday.

On the data front, at 04:30 GMT, the Average Cash Earnings for the Year came in as -0.8% against the expected -0.7% and weighed on the Japanese Yen. The Household Spending for the Year dropped to 1.9% against the forecasted 2.7% and weighed on the Japanese Yen and added gains in the USD/JPY pair. At 04:50 GMT, the Bank Lending for the Year came in line with the expectations of 6.3%. The Current Account Balance from Japan showed a surplus of 1.98T against the forecasted 1.83T for October and supported the Japanese Yen.

The quarter’s final GDP also raised to 5.3% against the expected 5.0% and supported the Japanese Yen. AT 04:52 GMT, the Final GDP Price Index for the Year raised to 1.2% against the forecasted 1.1% and supported the Japanese Yen. At 10:00 GMT, the Economic Watchers Sentiment dropped to 45.6 against the expected 52.7 and weighed on the Japanese Yen that supported the USD/JPY pair’s upward trend.

From the U.S. side, at 01:00 GMT, the Consumer Credit for October fell to 7.2B against the estimated 17.6B and weighed on the U.S. dollar. At 16:00 GMT, the NFIB Business Index fell to 101.4 against the estimated 102.6 in November and weighed on the U.S. dollar. At 18:30 GMT, the Revised Nonfarm Productivity for the quarter declined to 4.6% against the forecasted 4.9%, supported the U.S. dollar, and added further gains in the USD/JPY pair. The Revised Unit Labor Costs for the quarter came in as -6.6% against the projected -8.9% and supported the U.S. dollar and supported the USD/JPY pair’s upside momentum. At 20:00 GMT, the IBD/TIPP Economic Optimism came in as 49.0 in December than the previous 50.0.

Meanwhile, the USD/JPY pair’s gains remained limited as the U.S. dollar was under pressure as the country crossed 15 million coronavirus cases, which was the world’s highest total. American hospitals started to give warnings about the staff shortage and extensive spread of the disease. Pennsylvania’s governor Tom Wolf said that the coronavirus was spreading extensively throughout the state and could soon reach the level where hospitals will begin turning away patients. He also said that additional pandemic restrictions might be on controlling the spread of the virus.

Daily Technical Levels

Support   Resistance

104.00       104.27

103.84       104.38

103.73       104.54

Pivot point: 104.11

USD/JPY – Trading Tips

The USD/JPY is trading within a symmetric triangle pattern observed in the 4-hour timeframe. The pair recently disrupted the sideways trading series of 104.600 – 104.200, and now it’s trading at 104.300 level, especially after bouncing off over 103.700 level on the lower side, supporting the pair nearby 103.700 mark. On the downside, the USD/JPY may find support at the 103.200 level upon a bearish breakout of the 103.750 support level. While resistance stays at 104.350 and 104.700 today. Good luck

Categories
Crypto Market Analysis

Daily Crypto Review, Dec 09 – Bitcoin Drops to $18,000; Crypto Market Tumbles

The cryptocurrency sector has dropped significantly as bears took over the market. Bitcoin is currently trading for $18,315, representing a decrease of 4.50% compared to our last report. Meanwhile, Ethereum’s price has decreased by 6.17% on the day, while XRP managed to lose 7.73%.

 Daily Crypto Sector Heat Map

ALL BEST ICO gained 19,990.71% in the past 24 hours, making it the most prominent daily crypto gainer by far. It is followed by COIL’s 151.88% and Amun Bitcoin 3x Daily Short’s 112.92% gain. On the other hand, Monavale lost 54.51%, making it the most prominent daily loser. It is followed by KIMCHI.finance’s loss of 52.82% and Iteration Syndicate’s loss of 51.70%.

Top 10 24-hour Performers (Click to enlarge)

Bottom 10 24-hour Performers (Click to enlarge)

Bitcoin’s market dominance has moved to the upside just under half a percent since we last reported, with its value currently being 63%. This value represents a difference of 0.4% to the upside when compared to yesterday’s value.

Daily Crypto Market Cap Chart

The crypto sector capitalization has decreased significantly in the past 24 hours, with its current value being $536.08 billion. This represents a $32.76 billion decrease when compared to our previous report.

_______________________________________________________________________

What happened in the past 24 hours?

_______________________________________________________________________

_______________________________________________________________________

Technical analysis

_______________________________________________________________________

Bitcoin

After spending the past couple of days in a very narrow range, Bitcoin has finally made a move as bears took over the market. The price went down rapidly and reached as low as $18,000 at one point, but then went slightly above this crucial level.

While Bitcoin is safe from breaking $18,000 to the downside at the moment, Micheal van de Poppe pointed out that a large CME gap is looming. The gap ranges from $18,275 to $16,995.

Lastly, the Hash Ribbons indicator has posted a buy signal, giving long-term investors the green light to invest in Bitcoin. This indicator has proven itself one of the best RoI indicators for Bitcoin when it comes to long-term investing.

BTC/USD 4-hour chart

Bitcoin’s long-term technicals (weekly and monthly) are completely tilted towards the buy-side, while its daily overview is still bullish but showing slight signs of neutrality. On the other hand, its 4-hour overview is completely bearish.

BTC/USD 1-day Technicals

Technical factors (4-hour Chart):
  • Price is currently below both its 50-period EMA and its 21-period EMA
  • Price is at its bottom Bollinger band
  • RSI is close to being oversold (31.73)
  • Volume is average
Key levels to the upside          Key levels to the downside

1: $18,600                                 1: $18,190

2: $18,790                                 2: $17,780

3: $19,000                                  3: $17,200

Ethereum

Ethereum wasn’t immune to the downturn either, with its price dropping from the sub-$600 levels all the way down to just above $550. Unlike Bitcoin, however, there are no CME gaps to worry about, and Ethereum seems quite stable above $550.

The only thing to worry about when anticipating Ether’s next price move is Bitcoin’s movement. At the moment, Bitcoin is dictating all consolidations, as well as large moves in either direction.

ETH/USD 4-hour Chart

Ethereum’s monthly overview shows a full tilt towards the buy-side, while its daily and weekly overviews still show some signs of neutrality. On the other hand, its 4-hour overview is bearish but shows slight signs of neutrality.

ETH/USD 1-day Technicals

Technical Factors (4-hour Chart):
  • The price is currently below both its 50-period EMA and its 21-period EMA
  • Price is at its bottom Bollinger band
  • RSI is in the oversold territory (28.61)
  • Volume is above average
Key levels to the upside          Key levels to the downside

1: $565                                     1: $550

2: $582                                     2: $525 

3: $600                                      3: $510

Ripple

The fourth-largest cryptocurrency by market cap moved to the downside as well, with its $0.545 support level holding up as the last-resort support. XRP is currently stable and trading between $0.545 to the downside and $0.571 to the upside, with its price, seemingly creating a double bottom (today and on Dec 5).

XRP traders might want to (still) refrain from trading XRP simply due to the disbalance of the risk and reward, as well as due to its low volatility.

XRP/USD 4-hour Chart

XRP’s longer weekly and monthly time-frames show complete bullishness, while its 4-hour overview is completely bearish. Its daily overview is still bullish but shows some signs of neutrality or even some bearishness.

XRP/USD 1-day Technicals

Technical factors (4-hour Chart):
  • The price is currently below both its 50-period EMA, as well as its 21-period EMA
  • Price is at its bottom Bollinger band
  • RSI is close to being oversold (34.36)
  • Volume is slightly above average
Key levels to the upside          Key levels to the downside

1: $0.571                                   1: $0.545

2: $0.6                                       2: $0.5

3: $0.63                                    3: $0.475

Categories
Forex Elliott Wave Forex Market Analysis

EURUSD: is 1.22 at Hand?

The EURUSD pair advances in the extreme bullish sentiment range, consolidating the short-term rally that started on November 04th when the price found fresh buyers at 1.15615.

Technical Overview

The following 8-hour chart shows the short-term participants’ sentiment keeps pushing higher the price action. In this view, the common currency looks to consolidate the pair’s impulsive movement that began in early November.

In this chart, we can see that the current primary trend is clearly bullish. Simultaneously, the accelerated trendline identified with the green line shows the short-term bull market remains intact.

On the other hand, both the intraday sideways channel and the retracement observed in the EMA(60) to Close Index lead to a consolidation of the rally experienced by the common currency during the previous trading sessions.

Therefore, if the price action penetrates below 1.20338, the likelihood of a reversal movement in the EURUSD increases.

Short-term Technical Outlook

The short-term Elliott Wave view for the EURUSD pair unfolded in the next 4-hour chart reveals the advance in an incomplete bullish impulsive wave of Minor degree identified in green.

The EURUSD 4-hour chart illustrates the impulsive rally that began on November 04th when the price found fresh buyers at 1.16025. The price action currently looks to have completed its third wave of Minute degree labeled in black, confirmed by the broadest distance shown on the MACD oscillator

On the other hand, the consolidation structure in progress reveals the potential sideways advance of its fourth wave. Considering the Elliott Wave Principle, the fourth wave shouldn’t penetrate below the invalidation level located at 1.19201, which corresponds to the end of wave ((i)) in black.

Also, considering both the second wave, which looks like a simple corrective pattern, and the alternation principle on corrective waves, the fourth wave should be a complex correction. In this context, the fourth wave could be a triangle or a combination of simple waves grouped in a double-three or a triple-three formation.

Finally, the extension in terms of time should indicate the exhaustion of the bullish pressure; thus, the common currency could soon end its bullish cycle.

Categories
Forex Elliott Wave Forex Market Analysis

GBPAUD Consolidates in an Incomplete Correction

The GBPAUD cross continues consolidating in what is a corrective formation that continues in development since October 22nd when the price found fresh sellers on 1.85272. In this context, the current consolidation pattern suggests a coming rally in the following trading weeks.

Technical Overview

The next 12-hour chart illustrates the short-term market participants’ sentiment displaying the 90-day high and low range, which bounced in the bearish sentiment zone finding resistance in the neutral level of 1.80104, where the cross is still moving in the current trading session. However, as long as the GBPAUD cross doesn’t surpass and closes above the level of 1.80104, the bias will stay mostly bearish.

The primary trend identified in blue shows that the current uptrend remains in its formation process. In this context, the corrective movement in progress represents a secondary trend from the last upward move that carried the cross from 1.74935 to 1.85272.

Short-term Technical Outlook

The short-term Elliott wave view for the GBPAUD cross shown in the following 4-hour chart reveals the downward advance in an incomplete double-three pattern of Minute degree labeled in black, which suggests further declines for the following trading sessions.

The previous chart shows the GBPAUD developing a double three pattern. According to the textbook, this complex corrective formation follows an internal sequence subdivided into 3-3-3, where each three corresponds to a basic corrective structure.

Currently, the cross looks advancing in its wave (c) of Minuette degree labeled in blue, which belongs to the wave ((y)) of Minute degree identified in black. The movement developed until now fits two potential scenarios:

  • The first scenario considers the pause in the wave (c), which could see further declines to the demand zone between 1.7774 and 1.7716. The cross could even extend its drops until 1.7610 and 1.7554, where the price could find fresh buyers expecting a boost in its price to new highs.
  • The second occurs if the price ends its wave (c) in blue and rally toward fresh highs. In this context, the cross should confirm the breakout of the supply zone resistance at 1.8041. Also, the cross must break up the ((x))-(b) trend-line.

Finally, the invalidation level for this bearish sequence in progress can be found at the end of wave (b) in blue at 1.82144.

Categories
Crypto Daily Topic Forex Daily Topic Position-sizing Guide

Forex Academy’s Guide to Position Size

After completing our series on position size, we would like to summarize what we have learned and make conclusions.

Starting this video series, we have understood that position size is the most crucial factor in trading. On Position Size: The most crucial factor in trading, we learned that deciding the position’s size is not intuitive. In an experiment made by Ralf Vince using forty PHDs with a system with 60 percent winners, only two ended up making money. Thus, if even PHDs couldn’t making money on a profitable strategy, Why do you think you’re going to do it right? You need to follow a set of rules not to fool yourself.

The Golden rules of trading

The trading environment seems simple, but it’s tough. You have total freedom to choose entries, exits, and the size of your trade. Some brokers even offer you up to 500x leverage. But you’re not free from yourself and your psychological weakness, Therefore, you need to set up a set of rules to stop the market to play with you. In “The golden rules of Forex trading” III, and III, we propose specific rules it is advisable to follow to succeed in trading. These include never open a position without knowing your dollar risk, defining your profits in terms of reward/risk factors, and limit your losses to less than 1R, a risk unit. We also advise to keep a record of trades and identify your strategy’s basic stats: Average profit, the standard deviation of the profits, and drawdown.

The dark side of the trade

In our video, The Dark Side of Trade, we explain the relation between position size, results, and drawdown, showing that position size plays a vital role in both aspects. In the video, We show that while results grow geometrically ( 100x), drawdown increase arithmetically, 10X. But the lesson here is that the size of the position must be chosen with the drawdown in mind. That is, we should choose a position size so that the max drawdown could be limited to a desirable size. 

The Gamblers Fallacy 

on Position Size – The Gamblers Fallacy, we explain why it is wise to consider position sizing independently of the previous results. We explain that a new trading result does not usually depend on prior results; thus, modulating the trade size, such as do Martingale systems, is not only useless but dangerous because winning or losing streak ends are unpredictable.

The Advantage!

Even when most retail traders don’t realize it, the “how much” question is the advantage or critical factor to achieve your trading goals because the size of the position defines both the trading results and the risk, or max drawdown, in your trading portfolio. We mention in Position Sizing III- The Advantage that in 1991 the Financial Analyst Journal published a study on the performance of 82 portfolio managers over a 10-year period. The conclusion was that 90% of their portfolio differences were due to “asset allocation,” a nice word for “investment size.”

In this article, we also presented the simplified MCP model to compute the right lots to trade as:

M = C/P, where M is the number of lots, C is the (Cash at) Risk, and P is the Pip distance from entry to stop-loss. The cash will depend on the percent you’re willing to risk and the cash available in your trading account. 

Equity Calculation Models

In our next video of this series, Position Size IV – Equity Calculation Models, We explain several models to calculate several simultaneous positions: 

  • The Core Supply Model, in which you determine the nest trade’s size using the remaining cash as the basis for computing C.  
  • The Balanced Total Supply Model, in which C is determined by the remaining cash plus all the profits secured by a stop-loss.
  • The Total Supply Model, in which the available cash is computed by adding all open position’s gains and losses plus the remaining cash.
  • The Boosted Supply Model uses two pockets: the Conservative Money Pocket and the Boosted Monet Pocket. 

The Percent Risk Model

The Percent Risk Mode is the basic position sizing model, barring the constant size model. on Position Sizing Part 5, we analyze how various equity curves arise when using different percent risk sizes and how drawdown changes with risk. Finally, we presented an example using 2.5 percent risk for an average max drawdown of 21 percent.

The Kelly Criterion

Our next station is  The Kelly Criterion. The linked article explains how the Kelly Criterion is used to find the optimal bet amount to achieve maximal growth, based on the winner’s percentage and the Reward/risk ratio. The Kelly criterion was meant for constant reward bets, and as such, it cannot be used in trading, but it tells us the limit above which the size of the position increases the risk while decreases the profits. We should be aware of that limit considering that most retail Forex traders trade beyond it and blow out their accounts miserably.

Optimal fixed fraction trading

Optimal fixed fraction trading, Optimal f for short, is the adaptation of the Kelly criterion to the financial markets. The optimal f methodology was developed by Ralf Vince. In Position Size VII: Optimal Fixed Fraction Trading, we explain the method and give the Python code to find the Optimal fraction of a stream of trading results. The key idea behind the code is that the optimal fraction is the one that generates the maximal growth factor on a set of trades. That is, Opt F delivers the maximal geometric mean of the trading results.

Optimal f properties

But nothing in life seems easy. Optimal f has dark corners that we should be aware of. In Position size VIII – Optimal F Revisited, we analyze the properties of this positioning methodology. We understood that, due to the trading results’ random nature, we should find a safer way to find the optimal fraction to trade. This article presented a safer way to compute it using Monte Carlo resampling and take the minimum value as optimal f. This way, the risk of ruin is minimized while preserving the strong growth factor Opt f provides.

Market’s money

Traders define their recent trading gains as “market’s money. A clever way to profit from the usual winning streaks is to use the market’s money to increase the position size in a planned manner. In Position Sizing IX: Improving the Percent Risk Model-Playing with market’s money,

we present the N-Step Up position sizing strategy, an innovative algorithm that adds the gains obtained in previous trades to boost the profits. This way, it could increase the profitability by 10X with a max drawdown increase of roughly 2.8X, from 8.02% to 22.5%. This article analyzes four models: one, two, and three steps with 100% reinvestment and three steps with 50% reinvestment.

Scaling in and out

Our next section, Position sizing X: Scaling-in and scaling-out techniques, is dedicated to scaling in and out methods. Scaling in and out are techniques to increase the position size while maintaining the risk at bay. They work best with trending markets, for instance, the current crypto and gold markets. The main idea is to use the market’s money to add to our current position while trailing our stops. 

System Quality and Max Position Size

System quality has a profound influence over the risk, and, hence, over the maximum position size, a trader can take. In Position Sizing XI- System Quality and Max Position Size Part I and part II, we presented a study on how the trading strategy’s quality influences the maximum position size a trader should take. To accomplish this, we created nine systems with the same percentage of winners, 50 percent. We used Van K Tharp SQN formula to compute their quality and adjusted the reward to risk on each system to create nine variations with SQN from 1 to 5 in 0.5 steps. 

Then, since traders have different risk limits, we defined as ruin, a max drawdown below ten preset levels from 5 to 50 in 5-step.   

 Our procedure was to create a Monte Carlo resampling of the synthetic results, which simulated 10 thousand years of trading history on each system.  

Since a trading strategy or system is a mix between the trading logic and the trader’s discipline and experience, we can estimate that the overall outcome results from the interaction of the logic and the treader. Thus, we can accurately associate a lower SQN with lowing experienced traders and higher SQN to more professional traders. The study’s concussions suggest a limit of 0.5 percent risk on newbies, whereas more experienced traders could boost their trading risk to an overall 4.5%.

Two-tier Optimal f Positioning

After this journey, we have understood that Using Ralf Vince’s optimal f position sizing method means maximally growing a portfolio. Still, the risk of a 95% drawdown makes it unbearable for any human being. Only non-sentient robots can withstand such heavy drops. In Position sizing XII- Two-tier Optimal f, we analyzed the growth speed of a 1% risk size, and we compare it with the Optimal f. We were interested in the average time to reach a 10X final capital. We saw that on a system with 65.5% winners and a profit factor of 2 ( average Reward/risk ratio of 1.1), using 1 percent risk, it would take650 days ( about two years) on average, whereas, using optimal f sizes, this growth was reached in 42 days, less than one-tenth of the time!.

The two-tier Optimal f positioning method uses the boosted supply model, and is a compromise between maximal growth and risk. The main objectives were to preserve the initial capital while maintaining the Optimal f method’s growth characteristics as much as possible.

The two-tier optimal f creates two pockets in the trading account. 

  1. The first pocket, representing 25% of the total trading capital, will be employed for the optimal f method. The rest, 75%, will use the conservative model of the 1 percent model.
  2. After a determined goal ( 2X, 5X, 10X, 20X), the account is rebalanced and re-split to begin a new cycle.

In Position sizing XII- Two-tier Optimal f part II, we presented the Python code to accurately test the approach using Monte Carlo resampling, creating 10,000 years of trading history.

 The results obtained proved that this methodology preserved the initial capital. This feat is quite significant because it shows the trader will dispose of unlimited trials without blowing out his account. Since the odds of ending in the lowest possible scenario are very low, there is almost the certainty of extremely fast growths.

Finally, we also analyzed other mixes in the two-tier model, using Optf / 10, Optf/5, and Optf/2 instead of 1%, with goals of 10X growth to rebalance. These showed extraordinary results as well while preserving the initial capital. B.

Drawdowns

The trader should also consider the drawdowns involved before deciding which strategy best fit his tastes because, while this methodology lowers it, in some cases, it goes, on average, beyond 60%. We have found that the best balance between growth and risk was the combination of 75% Optf/10 and 25% Optf, which gave an average final capital of $21.775 million with an average drawdown of 37%.

To profit from this methodology, the trader must ensure the long-term profitability of his system. Secondly, he must perform a Monte Carlo analysis to find the lowest optimal f value. Finally, he should create an adequate spreadsheet to follow the plan.

Final words

After reading all this, we hope you know the importance of position sizing for your success goals as a trader.

One caveat: We have left some topics out, such as martingale methods, which many traders use and are the main cause of account blown out. Please adhere to the philosophy that position sizing should be thought of as a tool to reach your goals and handle your risk and drawdowns. As shown in The Dark Side of the trade, position sizing should be separated from the previous trades’ results.

Categories
Forex Course

187. Learning To Trade the News With Directional Bias

Introduction

In this course, we will further explain, with an example, how you can trade a news release with a directional bias. In the US, the labor market report is one of the most anticipated new releases in a month. The report has a significant impact on any pair with USD. Note that every trader has their approach to trading the news with a directional bias. Here’s our approach.

If you are a forex trader with a directional bias, you need to have in-depth knowledge of the news release you are trading. What do we mean by in-depth knowledge? Firstly, you have to know what that particular news release tells about the economy. For example, the US labor market report has the unemployment rate and nonfarm payroll data.

When both these indicators beat the analysts’ expectations, we can expect that the USD will become stronger than other currencies. The US labor market report is a leading indicator of consumer demand, contributing up to 70% of the GDP. Furthermore, in the current coronavirus pandemic, the labor market report is used to show the rate of economic recovery.

You’d also expect the USD to weaken relative to currencies it is paired with if the news of the labor market report doesn’t meet analysts’ expectations. In this case, it means that unemployment increased, and the economy didn’t add as many jobs as expected.

To make a proper directional bias trade, you need to understand how the labor market report impacts the forex price charts. You have to look into past releases and establish how much the market moved; this will help you get the average pip movement. You also need to be aware of the prevailing macroeconomic conditions and the recent unemployment rate trend.

What to do before the news release?

Go back a few hours on your chart and establish the intraday support and resistance levels. You will use these levels as your ‘take profit,’ and ‘stop-loss’ levels after the news is released.

Let’s check out the news release of the US unemployment rate on October 2, 2020, at 8.30 AM EST.

EUR/USD: Before US Unemployment Rate Release on October 2, 2020, 
just before 8.00 AM EST

Since the unemployment rate was lower than the previous release and also beat analysts’ expectations, our directional bias is to be bearish on the EUR/USD pair. In this case, we will use our previously established Support Level as the ‘take profit.’

EUR/USD: After US Unemployment Rate Release on October 2, 2020, 8.00 AM EST

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Categories
Forex Fundamental Analysis

EUR/USD Global Macro Analysis – Part 3

EUR/USD Exogenous Analysis

In the exogenous analysis, we’ll analyze the economic fundamentals that impact the Euro-US Dollar exchange rate. For this analysis, we’ll focus on:

EU and the US GDP Growth Difference

The primary drivers of GDP growth in an economy are domestic demand and international trade. When a country’s exports increase, it means that the demand for its currency also increases, which makes it appreciate.

The US and the EU GDP change are in tandem. In Q3 of 2020, the EU GDP expanded by 11.6%, while that of the US expanded at an annualized rate of 33.1%. Although this change seems much, the US GDP level is still about 3.5% lower than the pre-coronavirus pandemic levels.

Based on the correlation analysis of the GDP differential and the EUR/USD pair changes, we assign a deflationary score of -2. It implies that the difference in GDP growth between the EU and the US will lead to a bearish EUR/USD.

Trade Balance Difference

For each country, the trade balance shows if an economy is running on deficits in international trade. The trade balance is simply the difference between exports and imports. Surplus trade balance happens when an economy exports more than it imports. A negative trade balance means an economy is importing more than it exports.

The EU recorded a trade surplus of €24489.40 million in September 2020, while the US had a $63.9 billion trade deficit in the same period. The trade balance has a high correlation with the exchange rate of the EUR/USD pair. Therefore, we assign it an inflationary score of 7, meaning we expect a widening trade balance between the EU and the US to result in bullish EUR/USD.

EU and US Interest Rate Differential

This indicator measures the difference between the interest rates in the EU and that in the US. The economy with a higher interest rate will attract more investments from foreigners seeking higher returns.

In the US, the Federal Reserve has kept the interest rate within a range of 0% – 0.25%. In the EU, the ECB interest rate is 0%. Since the interest rate differential between the two economies is low, we do not expect it to impact the EUR/USD exchange rate. Therefore, we assign a deflationary score of -1. That means we expect it to result in a mild bearish trend for the EUR/USD pair.

Conclusion

The exogenous analysis of the EUR/USD fundamentals gives an inflationary score of 4. This implies that in 2020, the EUR/USD pair has had a bullish trend. In the short term, this bullish trend is expected to persist.

Note that the EUR/USD pair has formed a support level along with the middle Bollinger band. Therefore we can say that our Fundamental analysis is being supported by our Technical Analysis as well. Cheers!

Categories
Forex Fundamental Analysis

EUR/USD Global Macro Analysis – Part 1 & 2

Introduction

In this analysis, we’ll focus on endogenous economic growth factors in the EUR and the US. We’ll also analyze the exogenous factors that will help us compare the economic performance in both regions.

Endogenous economic factors are inherent within the domestic economy and are primarily driven by domestic demand. On the other hand, exogenous factors are external economic factors that result from a country’s participation in the international markets. Both of these factors influence the fluctuation of the currencies from both countries.

Ranking Scale

We will rank both the endogenous and the exogenous economic factors on a scale of -10 to +10. A negative ranking shows that the economic factor had a deflationary impact on the currency. Conversely, a positive ranking implies that it had an inflationary impact.

USD Endogenous Analysis – Summary

The USD endogenous factors recorded a score of -19.1, implying a deflationary effect on the USD. This essentially means that according to these indicators, the USD has lost its value since the beginning of this year.

You can find the complete USD Endogenous Analysis here.

EUR Endogenous Analysis – Summary

The endogenous analysis of the EU economy shows a modest deflationary score of -8.5. This means that in 2020, the Euro has shed some of its inherent value.

The endogenous economic indicators in the Eurozone are an aggregate of the 27 member countries in the EU.

  • Monthly retail sales

It measures the inflation-adjusted value of retail sales. About 40.1% of all retail sales in the EU are from food, drinks, and tobacco. Electronics and furniture account for 11.5%, while computer equipment accounts for11.4%. 9.2% of the retail sales are attributed to clothing and footwear,  while pharmaceutical and medical products account for 8.9%.

In September 2020, retail sales in the EU dropped by 2%. Given that retail sales account for about 70% of the GDP, our correlation analysis, we assign the EU retail sales an inflationary score of 2.5.

  • Industrial production

This indicator measures the total output by manufacturers, mines, and utility industries in the EU. The value is adjusted for inflation. Note that the industrial sector in the EU is among the top employers.

In September 2020, industrial production dropped by 0.4%, which is an improvement from the drop of 17.1% recorded in April. However, the change in industrial production has been steadily falling from a peak of 12.4% in May.

Based on our correlation analysis, we assign the EU change in monthly industrial production a deflationary score of -2.

  • Unemployment rate

This indicator shows the percentage of the total workforce in the EU who are seeking gainful employment. The data shows the monthly change.

In September 2020, the unemployment rate in the EU was 8.3%. Throughout the year, the EU has experienced a steady increase in the unemployment rate. This is due to the economic effects of the coronavirus pandemic. However, our correlation analysis shows the minimal impact of the unemployment rate on the EU GDP. Therefore, we assign it a deflationary score of -2.

  • Employment change

As an economic indicator, employment change shows the quarterly change in the number of EU citizens who are gainfully employed. This indicator can also be used to show the ability of the economy to create more jobs. It measures both full-time and part-time employment.

In the third quarter of 2020, the EU employment change increased by 0.9%, showing that the EU economy is recovering from the slump of Q2 2020. Our analysis shows a higher correlation of the employment change with the changes in GDP. Hence, we assign it an inflationary score of 4.

  • Business confidence

The business sentiment is also referred to as the Industry Sentiment. It measures the economic sentiment among manufacturers, consumers, and employers in the EU by rating the current and future economic conditions.

The lowest business confidence recorded in 2020 was -32.3 in April 2020. Since then, the indicator has been steadily improving to -9.5 in October. Based on the correlation analysis with the EU GDP, we assign business confidence a deflationary score of -3.

  • Consumer Spending

Consumer spending measures the quarterly amount that households spend on goods and services for personal consumption. As an economic indicator, it can be used to show households’ welfare and the prevailing economic conditions. Since consumer expenditure accounts for about 70% of the EU GDP, any changes in the quarterly expenditure are bound to impact the GDP levels directly.

In Q2 of 2020, consumer spending dropped to € 1511.14 billion from € 1716.59 billion in Q1 of 2020. It is the largest drop ever recorded in history and can be attributed to the pandemic-induced economic recession.

Due to its high correlation to the change in GDP, we assign consumer spending a deflationary score of -5.

  • European Union Government Debt To GDP

This ratio compares what the EU economy produces and what it owes. It shows the efficiency of the economic process and the capability of the government to service its debts without overstretching the available resources. Investors can use this ratio to gauge whether the debt in an economy is becoming unsustainable.

Increasing levels of government debt and a stagnating GDP results in a deflationary effect for the domestic currency.

By the end of 2020, the EU government debt to GDP is expected to reach 95% from 79.3% recorded in 2019. The higher government debt to GDP in 2020 is a direct result of the aggressive measures out in place to curb deep recessions from the coronavirus pandemic.

Based on our correlation analysis, we assign a deflationary score of -6 to the EU government debt to GDP.

  • EU Rate of inflation

In the EU, the inflation rate is best measured using the consumer price index (CPI). It measures the overall monthly change in the prices of consumer goods and services. The rate of inflation can be used as gauge the purchasing trends among households.

In theory, a rise in inflation implies that consumers’ demand for goods and services is increasing. Conversely, a drop in inflation implies that demand is shrinking hence corresponding to lower GDP levels.

In September 2020, the rate of inflation in the EU decreased by 0.2%. It is, however, an improvement from the -0.4% recorded in July and August. Based on its correlation with GDP, we assign the EU rate of inflation a score of 3.

In the next article, we have posted the Exogenous Analysis of the EUR/USD pair to have a clear idea of whether this pair is bullish or bearish market conditions.

Categories
Crypto Market Analysis

Daily Crypto Review, Dec 08 – BTC, ETH and XRP Preparing for a Big Move; Crypto Sector in Consolidation Mode

The cryptocurrency sector has spent the past 24, mostly consolidating, as it failed to reach past its resistance levels on Monday. Bitcoin is currently trading for $19,180, representing a decrease of 0.65% compared to our last report. Meanwhile, Ethereum’s price has decreased by 1.14% on the day, while XRP managed to lose 1.65%.

 Daily Crypto Sector Heat Map

Prophet gained 358.97% in the past 24 hours, making it the most prominent daily crypto gainer. It is closely followed by Seigniorage Shares’ 344.54% and xBTC’s 340.23% gain. On the other hand, CryptoBet lost 95.85%, making it the most prominent daily loser. It is followed by Semux’s loss of 90.60% and Bitball Nyan v2’s loss of 51.05%.

Top 10 24-hour Performers (Click to enlarge)

Bottom 10 24-hour Performers (Click to enlarge)

Bitcoin’s market dominance has moved to the upside over half a percent since we last reported, with its value currently being 62.6%. This value represents a difference of 0.6% to the upside when compared to yesterday’s value.

Daily Crypto Market Cap Chart

The crypto sector capitalization has increased in the past 24 hours, with its current value being $568.82 51.68 billion. This represents a $17.24 billion increase when compared to our previous report.

_______________________________________________________________________

What happened in the past 24 hours?

_______________________________________________________________________

_______________________________________________________________________

Technical analysis

_______________________________________________________________________

Bitcoin

Bitcoin has continued with its slow movement as another low volatility day passed. The largest cryptocurrency by market cap oscillated between $18,905 and $19,431. The one time it dropped under the $19,000 mark, it found support in the 50-period moving average, which has proven to be a strong (both support and resistance) level.

Due to the low volatility, traders can’t really do much at the moment. However, they can prepare for the next move Bitcoin makes.

Lastly, the Hash Ribbons (one of the best accumulation indicators) indicator has posted a buy signal, giving long-term investors the green light.

BTC/USD 4-hour chart

Bitcoin’s technicals on both short and long time-frames are bullish, with its weekly time-frame showing full tilt to the buy-side and its 4-hour, daily, and monthly time-frames tilting more towards neutrality.

BTC/USD 1-day Technicals

Technical factors (4-hour Chart):
  • Price is slightly above its 50-period EMA while being at its 21-period EMA
  • Price is at its middle Bollinger band
  • RSI is neutral (51.61)
  • Volume is slightly below average
Key levels to the upside          Key levels to the downside

1: $19,500                                 1: $19,000

2: $19,666                                 2: $18,790

3: $20,000                                  3: $18,600

Ethereum

Ethereum has, just like Bitcoin, had quite a slow day, with its price moving slightly down. At the moment, the second-largest cryptocurrency by market cap doesn’t seem like it will tackle $600, as its volume is too low to pressure this major resistance level. However, if and when a bull run past $600 happens, traders will have a great opportunity to catch a safe trade with a stop-loss slightly below $600 and a possible target of $620 or $630.

ETH/USD 4-hour Chart

Ethereum’s monthly overview shows a full tilt towards the buy-side, while its daily and weekly overviews show some signs of neutrality. On the other hand, its 4-hour overview is completely bearish.

ETH/USD 1-day Technicals

Technical Factors (4-hour Chart):
  • The price is slightly above its 50-period EMA while being slightly below its 21-period EMA
  • Price is at its middle Bollinger band
  • RSI is neutral (48.32)
  • Volume is below average
Key levels to the upside          Key levels to the downside

1: $620                                     1: $600

2: $630                                     2: $530 

3: $735                                      3: $510

Ripple

The fourth-largest cryptocurrency by market cap has close to no volatility, as well as very low volume on most exchanges. With the price movement being non-existent, there is not much to say about the current XRP trading. However, whenever the trading range is getting this narrow, a breakout is on the horizon.

XRP has created a flag formation on the 1-day chart, signaling that an increase in volume could bring a breakout to the upside and a possible spike of up to 60%, which would take the coin’s price above $1,00.


XRP/USD 4-hour Chart

XRP’s longer time-frames (weekly and monthly) show complete bullishness, while its 4-hour and daily overviews show some signs of neutrality or even bearishness.

XRP/USD 1-day Technicals

Technical factors (4-hour Chart):
  • The price is at its 50-period EMA, as well as at its 21-period EMA
  • Price is at its middle Bollinger band
  • RSI is neutral (50.46)
  • Volume is well below average
Key levels to the upside          Key levels to the downside

1: $0.666                                   1: $0.6

2: $0.78                                     2: $0.596

3: $0.79                                   3: $0.535

Categories
Forex Signals

Daily F.X. Analysis, December 08 – Top Trade Setups In Forex – Eyes on European Events! 

On the news front, the market is likely to remain muted in the absence of high impact events. Italian banks will be closed in observance of Immaculate Conception Day while the Frend Trade Balance, European Revised GDP q/q, and German ZEW Economic Sentiment will remain in the highlights today.

Economic Events to Watch Today  

 


 


EUR/USD – Daily Analysis

The EUR/USD pair was closed at 1.21088 after placing a high of 1.21660 and a low of 1.20784. EUR/USD pair extended its losses on Monday for the second consecutive day over the diminishing risk sentiment and the hopes for further easing package from ECB. The EUR/USD pair remained under pressure on Monday ahead of the upcoming ECB meeting on Thursday. The European Central Bank was set to deliver a further easing package of almost 500 billion euros to the Pandemic Emergency Purchase Programme that will extend the purchases for many more months and weighed on the single currency Euro. 

Furthermore, the European Central Bank is also expected to increase its targeted longer-term refinancing operations and also to make them more accommodative. The ECB’s governing council members said that these decisions have been taken to extend the duration of accommodative financial conditions to support the recovery in 2021 further and beyond, rather than making financial conditions right now more accommodative.

The pressure on ECB to over-deliver on the market expectations declined due to the recent improvement in global financial market conditions since Joe Biden won the U.S. presidential election and positive vaccine news in early November. The more important event of the day for EUR was the Summit of 27 E.U. countries that will begin on Thursday and Friday.

The top agenda will be Brexit in the Summit as the question remained that UK PM Boris Johnson and E.U. Commission President Ursula von der Leyen will be successful in reaching a deal before the Summit. The paused Brexit talks by top E.U. negotiator Michel Barnier on Friday also added pressure on EUR/USD pair on Monday. Another factor pressuring the European Union was the Polish and Hungarian veto against the E.U. Recovery Fund and the 2021-2027 Budget. Both nations announced their intentions shortly before ambassadors of the E.U. member states met on Monday to veto various parts of the financial settlement. If a deal cannot be agreed with these two nations regarding the rule of law attachments being added to funding, then the E.U. has threatened to go with EU-minus Poland and Hungary fiscal package. 

On the data front, at 12:00 GMT, the German Industrial Production also raised to 3.2% against the estimated 1.8% and supported Euro and capped further losses in EUR/USD pair. At 14:30 GMT, the Sentix Investor Confidence came in as -2.7 against the estimated -11.9 and supported Euro and limited additional losses in EUR/USD pair.

Daily Technical Levels

Support   Resistance

1.2113      1.2129

1.2107      1.2139

1.2097     1.2146

Pivot point: 1.2123

EUR/USD– Trading Tip

The market’s technical side continues to be the same as the pair continues to trade sideways due to a lack of high impact economic events. On the higher side, the EUR/USD may find an immediate resistance at 1.2160 and 1.2196 level. Simultaneously, the closing of candles below the 1.2103 level can send the EUR/USD pair further lower until 1.2080 and 1.2040 level. The MACD is strongly bearish; therefore, the idea will be to open a sell trade below the 1.2175 level today to capture quick green pips. 


GBP/USD – Daily Analysis

The GBP/USD pair was closed at 1.33785 after placing a high of 1.34375 and a low of 1.32239. The GBP/USD pair dropped to its lowest since November 19 on Monday in the early trading session due to the rising U.S. dollar, but it started to recover in the late trading session after the Brexit hopes raised. The U.S. dollar raised on Monday after the coronavirus cases continued to rise, and lockdowns expanded and weighed on the U.S. economic recovery. On Sunday, the Governor of California, Gavin Newsom, ordered large parts of the most populous U.S. state to close down as coronavirus cases spiked to record levels. 

On Sunday, California reported more than 30,000 new cases and marked a new record for hospitalized coronavirus patients. Other states including, New Jersey, North Carolina, Virginia, and West Virginia, also announced a record one-day rise in new infections. These increased cases raised concerns over the economic recovery hopes and raised the demand for safe-haven greenback that ultimately weighed on GBP/USD pair. However, the currency pair GBP/USD recovered some of its losses on Monday after the UK PM Boris Johnson revealed that he was set to travel to Brussels in a last-ditch effort to break a post-Brexit deal. The E.U. Commission President Ursula von der Leyen and the UK PM Boris Johnson will remove the differences on a post-Brexit deal in the coming days. This came in after a 90 minutes phone call between the two leaders failed to produce a breakthrough. 

In a joint statement, both said that the conditions for a deal were not there, and significant differences remained on fishing, level playing field, and any deal governance. They have asked their chief negotiators to prepare an overview of the remaining sticking points discussed in a physical meeting in Brussels in the coming days. A senior U.K. governmental source warned that a deal might not be possible after the phone call between Ursula and Johnson. It was also reported that the talks were in the same position as they were on Friday and made no progress. All these downbeat statements related to Brexit weighed heavily on GBP/USD pair.

On the data front, at 13:30 GMT, the Halifax Housing Price Index for November raised to 1.2% against the forecasted 0.6% and supported British Pound, and capped further losses in GBP/USD pair.

Daily Technical Levels

Support  Resistance

1.3377      1.3438

1.3338      1.3462

1.3315      1.350 0

Pivot point: 1.3400

GBP/USD– Trading Tip

The GBP/USD pair bounced off over 1.3263 level, trading at 1.3340 level now. On the 4 hour timeframe, the GBP/USD is consolidating in between a wide trading range of 1.3406 – 1.3263 level. The Cable may find the next support at 1.3204 level, and below this, the next support can also be found around 1.3100 level today. On the higher side, the resistance hold around the 1.3406 mark. The MACD and RSI are suggesting selling bais in the pair, and we should look for selling trades below 1.3400 and buying over 1.3265 level today. 


USD/JPY – Daily Analysis

The USD/JPY pair was closed at 104.046 after placing a high of 104.310 and a low of 103.920. On Monday, the USD/JPY pair consolidated within a tight range around 104.00 level after placing a high of 104.310 on the U.S. dollar’s strength in the early European morning. However, the pair USD/JPY reversed its direction and started posting losses in late trading hours. The U.S. dollar was strong in early European trade on Monday as the coronavirus cases continued to rise and lockdowns expanded and weighed on the U.S. economic recovery. The U.S. Dollar Index that tracks the greenback against the six other currencies basket was up by 0.3% at 90.993.

The record hike in the coronavirus spread caused the Governor of California, Gavin Newsom, to order large parts of the most populous U.S. state to close down again. California state reported 30,000 new cases in a single day and broke its daily high record. Other states like New Jersey, North Carolina, Virginia, and West Virginia also reported a record-high number of coronavirus cases.

The rising number of coronavirus infections and the U.S. hospitalization rate added pressure on the U.S. economic recovery and raised the appeal for safe-haven that ultimately added strength to the greenback. The strong U.S. dollar helped the USD/JPY pair rise to the 104.300 level in the early trading session.

However, the USD/JPY pair’s gains were short-lived as the pair started to decline in the late trading session and posted losses for the day. The decline in the USD/JPY pair was due to appreciation in the Japanese Yen after the lower U.S. yields on the day.

The 10-year Treasury yield fell by 4bps to 0.929%, and the 10-year real rates also dropped to -0.97% by 3bps. The declining U.S. yields thus decreased the attractiveness of USD investments relative to Japanese government bonds and underpinned selling pressure in the USD/JPY pair.

On the data front, at 09:59 GMT, the Leading Indicators from Japan came in line with the expectations of 93.8%. Meanwhile, the latest optimism regarding the vaccine and fiscal stimulus also kept the USD/JPY pair supported and limited the day’s losses.

Another reason behind the increasing demand for safe-haven Japanese Yen was the recent financial sanctions imposed by the U.S. and a travel ban on 14 Chinese officials over their suspected role in disqualifying elected opposition legislators in Hong Kong.

Hong Kong’s Beijing-backed government expelled four opposition members last month. In this response, the U.S. levied sanctions on Chinese officials and also blocked any assets the official might have within the U.S. These sanctions added in the safe-haven demand in the market and added strength in the Japanese Yen against the U.S. dollar, and weighed on the USD/JPY pair on Monday.

Daily Technical Levels

Support   Resistance

104.10      104.27

104.00      104.34

103.94      104.44

Pivot point: 104.17

USD/JPY – Trading Tips

The USD/JPY is trading within a symmetric triangle pattern seen in the 4-hour timeframe. The pair lately violated the sideways trading range of 104.600 – 104.200, and now it’s trading at 104.300 level, especially after bouncing off over 103.700 level on the lower side, supporting the pair around 103.700 level. On the downside, the USD/JPY may find support at the 103.200 level upon a bearish breakout of the 103.750 support level. While resistance stays at 104.350 and 104.700 today. Good luck

Categories
Forex Elliott Wave Forex Technical Analysis

US Dollar Index Under Bearish Pressure. What’s next?

The US Dollar Index (DXY) consolidates on Monday’s session in the extreme bearish sentiment zone bouncing a modest 0.06% from the last Friday 04th, from 90.476 to 90.757. However, the technical perspective is mostly bearish for the DXY basket of currencies.

Technical Overview

The following 8-hour chart shows the mid-term market participants’ sentiment unfolded in its 90-day high and low range. The figure reveals the bearish pressure that carries the Greenback in the extreme bearish zone between 90.476 and 91.543. Likewise, the intraday sideways candlestick formation suggests the likelihood of a pause and the downward continuation for the following trading sessions.

Regarding the US Dollar’s trend, the primary trend plotted in the blue line reveals the bearish bias. The secondary trend identified in green suggested the downward acceleration since November 04th when the price failed its bullish advance at 94.316. Likewise, the broader distance between the primary trend-line and the price leads to a limited correction before continuing the bearish path.

Short-term Technical Outlook

The short-term Elliott Wave perspective for the US Dollar Index exposed in the next 2-hour chart suggests the incomplete downward advance of a five-wave sequence, which could be starting to consolidate in its fourth wave of Minuette degree identified in blue.

The current bearish sequence began on November 04th when the price found fresh sellers at 90.302 and began a decline that is still present to date. The previous chart suggests the completion of the third wave of Minuette degree. This Elliott wave context is supported by the broadest distance observed in the MACD oscillator.

On the other hand, considering that the second corrective wave seems simple in terms of price and time, the alternation principle suggests that the fourth wave in progress should be complex in terms of price, time, or both. In this context, the next corrective pattern could be a triangle pattern or a combination such as a double-three or a triple-three formation.

The implication of the fourth wave’s extension could be indicative of the exhaustion of the bearish trend, and the price action should reverse soon.

Finally, if the price action rises and closes above the supply zone between 91.412 and 91.580, the US Dollar Index could reveal a possible reversion of the current bearish trend.

Categories
Forex Market Analysis

Daily F.X. Analysis, December 07 – Top Trade Setups In Forex – Eyes on European Events! 

The calendar is a bit muted today, and the market can exabit thin trading volume on the news front. However, the focus can stay on German Industrial Production m/m and Sentix Investor Confidence from the Eurozone, which are expected to perform better than the previous month and may underpin the Euro currency. Besides, the U.K. Halifax HPI m/m will also play a slight role in determining the GBP trend, while economists expect HPI to improve from 0.3% to 0.6% this month.

Economic Events to Watch Today  

 


EUR/USD – Daily Analysis

The EUR/USD pair was closed at 1.21185 after placing a high of 1.21772 and a low of 1.21101. After rising for three consecutive days, the EUR/USD pair dropped on Friday after the initial rally. The downfall in EUR/USD pair on the day came in after U.S. job figures’ release.

In the trading session on Friday, the EUR/USD pair rallied slightly on the back of improved risk sentiment and the U.S. dollar’s weakness. The risk perceived EUR/USD followed the optimism regarding the coronavirus vaccine and moved higher in the early trading session on Friday. Besides, the U.S. dollar’s weakness due to the increased spread of coronavirus and hospitalization rate in the U.S. also added strength to the rising EUR/USD pair.

The U.S. dollar was also weak due to increased hopes for the next round of U.S. stimulus package after the CARES Act passed in March. Democrats and Republicans have agreed over a $908 billion stimulus package, and the expectations have increased that a big stimulus will also be delivered soon. The weak U.S. dollar gave a Pushto EUR/USD pair on Friday and raised its prices above the 1.21700 level.

However, the EUR/USD pair’s gains started to reverse and converted into losses after the release of macroeconomic data from the U.S.

At 12:00 GMT, the German Factory Orders for November raised to 2.9% against the expected 1.4% and supported Euro. At 12:45 GMT, the French Gov Budget Balance came in as -159.9B. At 14:00 GMT, the Italian Retail Sales raised to 0.6% against the forecasted 0.2% and supported Euro.

At 18:30 GMT, the Average Hourly Earnings rose to 0.3% against the anticipated 0.1% and supported the U.S. dollar and added pressure on EUR/USD. The Non-Farm Employment Change declined to 245K against the anticipated 480K and weighed on the U.S. dollar. 

The Unemployment Rate declined to 6.7% against the anticipated 6.8% and supported the U.S. dollar and dragged the EUR/USD pair. The Trade Balance from the U.S. came in as -63.1B against the anticipated -64.7B and supported the U.S. dollar and weighed on EUR/USD pair. At 20:00 GMT, the Factory Orders for November raised to 1.0% against the anticipated 0.8% and supported U.S. Dollar. Most of the U.S. data came in support of the U.S. dollar that resulted in the EUR/USD pair’s downfall on Friday in the late trading session.

Daily Technical Levels

Support  Resistance

1.2101        1.2178

1.2063       1.2215

1.2025       1.2254

Pivot point: 1.2139

EUR/USD– Trading Tip

On Monday, the EUR/USD continues to trade sideways amid mixed NFP figures released on Friday. On the higher side, the EUR/USD may find an immediate resistance at 1.2160 and 1.2196 level. While the closing of candles below the 1.2103 level can send the EUR/USD pair further lower until 1.2080 and 1.2040 level. The MACD is strongly bearish; therefore, the idea will be to open a sell trade below the 1.2175 level today to capture quick green pips. 


GBP/USD – Daily Analysis

The GBP/USD pair was closed at 1.3413 after a high of 1.35390 and a low of 1.34096. The GBP/USD pair rose to its highest level since May 2018 in the early trading session on Friday over the combined factor of Brexit optimism and the weakness of the U.S. dollar. However, the British Pound cut its gains after the E.U.’s Brexit negotiator Michel Barnier paused the talks.

During the early trading session on Friday, the GBP/USD pair rose and started to post gains following the Brexit optimism triggered after the agreement was reached over the Fisheries between the U.K. and the E.U. Another factor involved in the GBP/USD pair’s upward momentum was the U.S. dollar’s weakness.

The U.S. dollar index (DXY) that measures the value of the U.S. dollar against the basket of six currencies fell to its six years, the lowest level of 90.47 on Friday. The losses in DXY were due to a combination of factors, including the rising number of coronavirus in the nation and the rising expectations of the U.S. stimulus package.

The number of new coronavirus cases in the past five days in the U.S. reached about 1 million. The hospitalization rate also increased to an alarming level and hit a record high after 101,487 patients were reported to be hospitalized in a single day. This negative news from the U.S. added further pressure on the U.S. dollar and supported the upward trend in the GBP/USD pair in the early trading session on Friday.

British Pound was under demand on Thursday after the U.K. and E.U. reported that they had reached an agreement over one key sticking issue of Fisheries. Investors started to buy GBP/USD in the early trading session on Friday as they continued following the previous trend.

However, the currency pair GBP/USD pair started to decline on Friday after the release of U.S. macroeconomic data and the announcement from Michel Barnier. The E.U. Brexit negotiator, Michel Barnier, said that he had paused the trade talks with the U.K. and added that the conditions for a deal had not yet been met.

After one week of intensive negotiations in London, the U.K. and E.U. agreed to pause talks because the post-Brexit deal conditions were not met. Barnier said that E.U. Commission president Ursula von der Leyen and PM Boris Johson would try to make progress on a deal in the next meeting that will take place on Saturday.

After these comments by the E.U. top negotiator, the earlier optimism that the deal was imminent could be reached before the end of the week. These updates suggested that talks have reached a very critical stage, and anything could happen. It raised the market’s uncertainty and supported the safe-haven greenback that exerted pressure on GBP/USD pair.

On the data front, at 14:30 GMT, the Construction PMI from Great Britain raised to 54.7 against the projected 52.3 and supported British Pound and limited the losses in GBP/USD pair.

From the U.S. side, at 18:30 GMT, the Average Hourly Earnings surged to 0.3% against the projected 0.1% and supported the U.S. dollar and added losses in GBP/USD pair. The Non-Farm Employment Change fell to 245K against the projected 480K and weighed on the U.S. dollar. The Unemployment Rate fell to 6.7% against the projected 6.8%, supported the U.S. dollar, and dragged GBP/USD pair. The Trade Balance from the U.S. came in as -63.1B against the projected -64.7B and supported the U.S. dollar. At 20:00 GMT, the Factory Orders for November surged to 1.0% against the projected 0.8% and supported U.S. Dollar and added losses in the GBP/USD pair on Friday.

Daily Technical Levels

Support   Resistance

1.3286       1.3441

1.3209       1.3519

1.3131       1.3596

Pivot Point: 1.3364

GBP/USD– Trading Tip

The GBP/USD is falling dramatically from 1.3450 to 1.3230 level by the time of covering this report. On the 4 hour timeframe, the GBP/USD pair has dipped sharply and has already violated the upward channel, which supported the pair around the 1.3350 level. The Cable may find the next support at 1.3204 level, and below this, the next support can also be found around 1.3100 level today. On the higher side, the resistance hold around the 1.3300 mark. The MACD and RSI are suggesting selling bais in the pair, we should look for selling trades below 1.3350 and buying over 1.3185 level today. 


USD/JPY – Daily Analysis

The USD/JPY pair was closed at 104.186 after placing a high of 104.242 and a low of 103.736. The currency pair USD/JPY rose on Friday amid the supportive U.S. macroeconomic data and the increased U.S. yields.

On Friday, the U.S. Bureau of Labour reported that only 245K jobs were added to the economy while the unemployment rate fell by 0.2% in November and supported the U.S. dollar.

On the data front, at 18:30 GMT, the Average Hourly Earnings advanced to 0.3% against the anticipated 0.1% and supported the U.S. dollar and added gains in the USD/JPY pair. The Non-Farm Employment Change declined to 245K against the anticipated 480K and weighed on the U.S. dollar capped further gains in the USD/JPY pair. The Unemployment Rate declined to 6.7% against the anticipated 6.8% and supported the U.S. dollar.

The Trade Balance from the U.S. came in as -63.1B against the anticipated -64.7B and supported the U.S. dollar and pushed the pair USD/JPY higher. At 20:00 GMT, the Factory Orders for November advanced to 1.0% against the anticipated 0.8% and supported the U.S. Dollar, and added further gains in the USD/JPY pair.

The U.S.’s supportive data proved good news for the market that pushed the S&P 500 to an all-time high and raised the U.S. 10-year yield by 5bps to 0.97%. The rise in U.S. yields also added strength in the U.S. dollar and added gains in the USD/JPY pair. The less than expected job creation by the U.S. Labor Department made the near-term U.S. fiscal stimulus more likely and exerted pressure on Congress to swiftly avert the labor market’s slowdown.

However, the risk sentiment was also strong in the market after the vaccine optimism escalated and supported the hopes that the economic activities will return to pre-pandemic levels. These hopes, along with the rising expectations that the world’s largest economy will also recover soon as the stimulus package was near to be delivered, added to the risk-sentiment. These risk flows added weight on the safe-haven Japanese Yen that supported the USD/JPY pair and pushed it higher.

Meanwhile, the gains in the USD/JPY pair were also limited because of the rising number of coronavirus cases in the U.S. Over the period of 5 days, the U.S. has recorded about 1 million new coronavirus cases, and the hospitalization rate in the U.S. also hit its highest record by reaching more than 104,000 patients in a single day.

The USD/JPY pair rose on Friday due to supportive U.S. macroeconomic data, higher U.S. yields, and the rising risk sentiment in the market due to global economic recovery hopes.

Daily Technical Levels

Support   Resistance

103.48       104.35

103.13       104.89

102.60       105.23

Pivot point: 104.01

USD/JPY – Trading Tips

The USD/JPY is trading within a symmetric triangle pattern seen in the 4-hour timeframe. The pair lately violated the sideways trading range of 104.600 – 104.200, and now it’s trading at 104.300 level, especially after bouncing off over 103.700 level on the lower side, supporting the pair around 103.700 level. On the downside, the USD/JPY may find support at the 103.200 level upon a bearish breakout of the 103.750 support level. While resistance stays at 104.350 and 104.700 today. Good luck

Categories
Forex Market Analysis

NZDCAD Heavy Drops driven by a Sharp Shift in Market Sentiment

In the last trading week, the NZDCAD cross  90-Day market sentiment declined from the extreme bullish to the bullish sentiment zone. The move was helped by the Canadian unemployment rate figures, which declined to 8.5% in November, beating the analysts’ expectations of 8.9%. 

Source: TradingEconomics.com

The last unemployment rate reading represents an improvement in the Canadian labor market, which showed a slight decline to 8.9% in October. On the other hand, during the current year, the data gathered from Statistics Canada stated that the record unemployment high was Mays figure of 13.7%, its highest level in more than four decades.

Technical Overview

The following 8-hour chart illustrates the market participants’ sentiment unfolded in the 90-day high and low range, revealing an aggressive decline in the Friday 04th trading session where the cross dropped over 1.7%. 

In this context, the downgrade on the market sentiment leads us to expect a corrective movement. This potential drop could find support in the neutral zone of 0.88698. Likewise, the descending of the NZDCAD EMA(60) to Close index below the zero-line drives us to anticipate a consolidation during the coming trading sessions before continuing a further decline.

Technical Outlook

The NZDCAD cross in its 8-hourly chart illustrates the mid-term uptrend that began on March 18th once the price confirmed its bottom of 0.80849. The primary trend plotted in blue reveals that the bull market remains intact.

Likewise, the breakdown observed in the last ascending secondary trend identified in green reveals a short-term correction with three potential key support levels: 0.89469, 0.88583, and 0.87489. Each of these levels shows a zone where the price action developed a polarization movement.

The following 2-hour chart shows an impulsive movement, which began on October 20th when the price found support at 0.86270. After completing its third wave of Minuette degree, in blue, the NZDCAD cross found resistance on December 03rd at 0.91630, where it started a decline in an incomplete corrective sequence that could correspond to wave (iv), in blue.

In this context, the cross could develop two potential scenarios:

  • The first scenario occurs if the price completes the third wave on 0.91630. In this case, the cross could advance mostly sideways in its wave (iv), in blue. In this scenario, the cross could find support in the demand zone between 0.89723 and 0.89490, where the price could begin to advance in its wave (v) of Minuette degree at least to the 0.9163 level.
  • The second scenario: considers an alternative count and occurs if the NZDCAD cross completes a wave (v), in blue, on 0.91630. If that is the case, it implies the price is currently advancing in a corrective formation of Minuette degree. Thus, the price could create a decline in a three-wave sequence toward the next demand zone between 0.88437 until 0.88234. 

In both scenarios, the invalidation level is found below the origin of wave (i) at 0.86270.

Categories
Crypto Market Analysis

Daily Crypto Review, Dec 07 – ETHE and GBTC Grayscale Funds Reach All-Time High Average Daily Volumes in November

The cryptocurrency sector has spent the weekend recovering from the price descent on Dec 3 and 4. Bitcoin is currently trading for $19,288, representing an increase of 0.16% compared to our last report. Meanwhile, Ethereum’s price has decreased by 1.49% on the day, while XRP managed to lose 0.74%.

 Daily Crypto Sector Heat Map

Omnitude gained 241.76% in the past 24 hours, making it the most prominent daily crypto gainer. It is closely followed by KIMCHI.finance’s 185% and Badger DAO’s 123.92% gain. On the other hand, DAV Coin lost 71.6%, making it the most prominent daily loser. It is followed by Semux’s loss of 66.12% and Bitball Treasure’s loss of 65.05%.

Top 10 24-hour Performers (Click to enlarge)

Bottom 10 24-hour Performers (Click to enlarge)

Bitcoin’s market dominance has barely moved to the downside since we last reported, with its value currently being 62.1%. This value represents a difference of 0.3% to the downside when compared to Friday’s value.

Daily Crypto Market Cap Chart

The crypto sector capitalization has decreased over the weekend. Its current value is $551.68 billion, representing an $18.83 billion decrease when compared to our previous report.

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What happened in the past 24 hours?

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Technical analysis

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Bitcoin

Bitcoin has spent the weekend trying to recover from the downturn it had on Dec 3 and 4. The largest cryptocurrency by market cap has formed a triangle formation that is respected throughout the weekend and then broke it to the upside. While the move was short-lived, the overall short-term bullishness has increased.

Some traders see a bull flag instead of the triangle formation, which makes the possibly future even more bullish. Posting any short trades would most likely be more risky than profitable at the moment.

It is also important to note that the Has Ribbons (one of the best accumulation indicators) indicator has posted a buy signal.

BTC/USD 4-hour chart

Bitcoin’s technicals on all time-frames are bullish, with 4-hour and weekly time-frames showing full tilt to the buy-side and daily and monthly time-frames tilting more towards neutrality.

BTC/USD 1-day Technicals

Technical factors (4-hour Chart):
  • Price is above its 50-period EMA and slightly above its 21-period EMA
  • Price is slightly above its middle Bollinger band
  • RSI is neutral (54.36)
  • Volume is below average
Key levels to the upside          Key levels to the downside

1: $19,500                                 1: $19,000

2: $19,666                                 2: $18,790

3: $20,000                                 3: $18,500

Ethereum

Ethereum has spent the weekend slowly pushing towards the upside, reaching just under $600 and bouncing off the resistance level. Its current failure to break $600 is not a big red flag, as Ethereum’s large moves are (lately) mostly caused by Bitcoin’s movement.

Ethereum traders have a great opportunity to catch a safe trade if ETH/USD breaks $600. A stop-loss slightly below $600 and a possible target of $620 or $630 would make quite a viable trade.

ETH/USD 4-hour Chart

Ethereum’s 4-hour, weekly, and monthly overviews show a full tilt towards the buy-side, while its daily overview shows some signs of neutrality.

ETH/USD 1-day Technicals

Technical Factors (4-hour Chart):
  • The price is slightly above its 50-period and at its 21-period EMA
  • Price is at its middle Bollinger band
  • RSI is neutral (50.51)
  • Volume is slightly below average
Key levels to the upside          Key levels to the downside

1: $620                                     1: $600

2: $630                                     2: $510 

3: $735                                      3: $500

Ripple

The fourth-largest cryptocurrency by market cap experienced slightly more volatility over the weekend than during the previous week, with its price hovering between $0.542 and $0.626. The $0.6 level is currently holding quite well as a support line, and XRP shows no signs of dropping below it unless some external factor surfaces.

Trading XRP is, even with the slight increase in volatility, a near-impossible feat at the moment. Trading other (more volatile) cryptocurrencies could be a much better option.

XRP/USD 4-hour Chart

XRP’s 4-hour, weekly, and monthly overviews show complete bullishness, while its daily overview shows some signs of neutrality.

XRP/USD 1-day Technicals

Technical factors (4-hour Chart):
  • The price is at both its 50-period EMA and its 21-period EMA
  • Price is at its middle Bollinger band
  • RSI is neutral (53.49)
  • Volume is slightly below average
Key levels to the upside          Key levels to the downside

1: $0.666                                   1: $0.6

2: $0.78                                     2: $0.596

3: $0.79                                   3: $0.535

Categories
Crypto Market Analysis

BTC/USD Weekly Chart Analysis + Possible Outcomes

In this weekly BTC/USD analysis, we will be taking an in-depth look at the most recent technical formations, as well as look for the possible short-term price outcomes.

Overview

Bitcoin has spent the past week recovering levels it lost in a Nov 25 crash and even managed to push to a new all-time high on some exchanges. Still, the end-goal of Bitcoin above $20,000 was not reached.

Bitcoin’s institutional activity is more than booming, with news coming out left and right about companies investing in crypto, financial institutions preparing to embrace Bitcoin as an asset class, as well as regulators allowing Bitcoin to be held in employees’ company-funded 401k plans. On the other hand, Not being able to push past the $20,000 resistance level due to an incredible amount of sell orders near it has brought Bitcoin bears another day of hoping that the price will go lower.

Technical factors



Bitcoin has continued moving up until reaching an all-time high on some exchanges and then creating a doji candle followed by an inverted hammer candle on a weekly time-frame, indicating a possible bearish outlook as Bitcoin has most likely reached its short-term top. Looking at the shorter time-frames, such as the 4-hour one, we can see that Bitcoin has formed either a triangle formation or (if we include the movement from that started on Nov 27) a bull flag, which goes against the previously mentioned bearish outlook. Any break from the channel Bitcoin is trading in at the moment could mean a strong move towards that side.

The hash ribbons indicator flashed a BUY signal, which is an incredibly important update for long-term investors, as this indicator was the most consistent investment tool when it comes to RoI.

Likely Outcomes

Bitcoin’s sending out mixed signals on different time-frames, indicating indecisiveness from the retail sector. On the other hand, companies and institutions show incredibly bullishness as they are buying up Bitcoin over-the-counter. While a move to the downside is quite possible at the moment, the overall current trend is bullish, and short-selling could possibly harm traders’ portfolios more than they can improve it.

1: If Bitcoin fails to establish itself above $19,100 and breaks the range to the downside (slightly less likely), its most likely target will be $18,450. Due to a large number of buy orders in the zone between $18,190 and $18,450, this is the most likely place for reaccumulation and a push towards the upside after a pullback.

2: If Bitcoin manages to push towards the upside, first breaking $19,100 and then the descending black line (top line of the triangle formation), we can expect the price to attempt another push above $20,000, with the possibility of breaking it this time. If Bitcoin proves to be in a bull flag formation rather than a triangle formation, the profit target stays the same ($19,666 with possibly taking some profits along the way).

Entering any trade with having a target of above $20,000 is quite risky, and it would be better to play it safe and end the trade pre-$20,000 and then re-enter it if the price confidently moves up. The same goes for entering a short trade with sub-$18,450 in mind.

Categories
Forex Videos

How To Trade Forex Like Bankers Do & Spot Their Tactics!


A retail trader’s insight into how bankers trade Forex

 

In this session, we will give retail traders some insight into how professional bankers trade forex, with their own bank’s money, in the forex market.

Wouldn’t it be absolutely fantastic if everybody traded forex the same way?  But of course, that is not the case because traders use different time frames, have different opinions about where currency exchange rates should be, they have different views on political and economic situations which will affect forex exchange rates, and this dynamic array of variances makes Forex moves very difficult to predict on a long-term basis.  Situations can change in the blink of an eye and cause price action moves and reversals, which nobody could have foreseen.

However, if retail traders knew what was going on behind the scenes at a major investment bank, might it give them a better understanding of how price action is affected by the big guns’ actions?  Well, yes, it would.

Firstly, it is he said that under 10% of bank traders’ own banks’ funds, accounts for 90% of all forex volumes. The best way to explain this is to say that the average forex retail trader probably trades between a couple of dollars per pip, with larger account balance traders ramping their trades up to $10 or a standard lot, equivalent, and perhaps a little more when risk suits. And now factor in the fact that over 75% of retail traders lose all of their money in the first 6 months of trading.

And now, let’s look at bankers. The majority of their trading is for their corporate or high net worth client base, where they instigate forex trades on those client’s behalf. And where some of these trades are speculative, and some of these trades are because of clients doing business in other currencies abroad, or perhaps hedging against inflation or portfolios or fluctuating exchange rates, etc.

But when the bankers themselves come to trade, these guys do not mess about. They are likely to instigate a spot or forward Forex trade in ticket sizes ranging from $10 million up to $500 million.  And in which case, they are certainly not picking their trades on a whim. They do not scalp, and they do not go long or short because a stochastic is overbought or oversold, or because an RSI has reached a particular area, or because a Fibonacci retracement to X, Y, or Z level has occurred.

Professional bank traders have a dedicated team behind them who are professional analysts and economists advising them. They have a defined fundamental and technical view of where an exchange rate should be and where reversals in price action might occur, and they tend to be swing traders, not intraday traders, and they usually only do a couple of trades a week on their own bank’s book. But how do they choose their levels?

You definitely will not find something like this one hour chart of the EURUSD pair on a professional bank trader’s screen, which is cluttered with lagging indicators.

However, you probably would find something like this daily EURUSD chart. But what are they looking at? What information does such a chart provide them? 

Actually, it provides them with a wealth of information, such as here we have added some notes, including at position A , which shows defined lines of resistance and support, in a wedge-shaped formation, where a bullish breakout occurs.

And at position B, where price reverses 300 pips from the key 1.200 level, before forming a support line and where the price is moving higher, potentially retesting that key level again.

Now, if our professional bank traders bought this pair at the breakout from position A and rode that trade up to the peak at position B, they would have made 1000 pips on that trade, on a multimillion Euro – in this case – ticket size. The profits would have been incredible. 

Therefore, we know that professional bank traders take a longer-term view of the market. They enter with large size ticket trades, and they use a minimal amount of technical analysis indicators, preferring to draw their own trendlines while looking for breakouts and concentrating heavily on key numbers for support and resistance.

While bankers have deep pockets in terms of how much exposure they have with regard to stop losses, it is almost impossible for a retail trader to incorporate the same amount of risk into their trades.  However, if a retail trader understands where these large ticket trades are occurring, it could be beneficial in terms of their own trading setups.

In conclusion, no matter what your trading style is, look at the longer time frames and look at key areas of support and resistance, which is the institutional size traders maybe referring to, in order to better select your trades on the lower time frames.

Categories
Forex Videos

Forex – Fed Saturates The Markets With Dollars – How Should You Trade The Dollar Now!


Fed saturates the markets with dollars – what next? 

 

In this session, we will be looking at the extraordinary amounts of US dollars, which have been printed by the federal reserve in America and flooded into the system to try and prop up the US economy during the coronavirus.

Since the pandemic began and started to bite in the United States, it is estimated that over 20% of all circulating US dollar bills were printed during this time.

 Although the federal reserve has publicly declared that their monetary policy has not been designed to save Wall Street,…..

….there is no denying from this chart that dollars,  which are required to buy United States stocks,  are finding their way into US stocks and indices, such as the Dow Jones Industrial Average Index shown here, which had climbed from the panic sell-off in March 2020 when the pandemic began to take a grip of the United States,  up to record highs of over 30 thousand.

Purely on a supply and demand basis,  the shock and magnitude of the influx into the market of the US dollar has gone a long way to shedding its market value against currencies, including the major currency pairs as shown here on this dollar index where it was at a high of 103.00 in March, and while the fed has been pumping dollars into the system, it has collapsed to 91.70 at the time of writing.

While the safety of gold saw investors take flight here during the latter part of March 2020, causing the precious metal to rise in value in a risk-off event during the early stages of the pandemic in the USA to a peak of over 2000 an ounce, and where traders have pulled back while shifting their focus to the US stock market, in a risk-off phase, and where gold currently sits around 1800 per ounce.

The federal reserve has been getting into the markets indirectly, via the backdoor, by talking to hedge funds, mutual funds, credit facilities, market makers, and commercial paper funding facilities, and instigated a huge emergency repo loan operation with the New York fed, where it is said that over 6 trillion dollars have as entered into circulation through this facility.

The Fed’s pumping of dollars into the market, where its value has crashed in value relatively over the last 100 years, has given fuel for the rise in interest for bitcoins and other cryptocurrencies and as we have seen gold and other precious metals, while investors try to hedge against dollar depreciation and inflation, as the dollar continues to lose value against other assets. 

 And by the time the new president-elect, Joe Biden, takes office, the two political houses in the USA, currently at loggerheads, will agree more stimulus, in the range of 1 to 2 trillion dollars, and where once this has been agreed, this will only pour more oil on the burning cauldron and the effect will likely be the US dollar’s further decline, with a knock-on effect being volatility in the financial markets, and higher prices for consumers.  

Categories
Forex Signals

USD/CAD Bearish Bias Seems to Halt – Eyes on U.S. NFP Figures! 

The USD/CAD pair was closed at 1.28619 after placing a high of 1.29411 and a low of 1.28519. The USD/CAD pair extended its losses for the 3rd consecutive day on Thursday due to broad-based U.S. dollar weakness and the rising crude oil prices.

The USD/CAD fell to its lowest since October 2018 on Thursday as the U.S. Dollar Index (DXY) reached 90.50 level, its lowest for 31 months. The U.S. dollar weakness could be attributed to the latest progress made in the talks of stimulus relief package in the U.S.

The Top Democrats officials, including President-elect Joe Biden, House Speaker Nancy Pelosi, and the Senate Minority Leader Chuck Schumer, have said that they favored a $908 billion worth bipartisan bill for now as it was the starting step towards the stimulus package. These comments from Democrats raised hopes that a deal might be reached between Republicans and Democrats. Both parties have a shared view that there was a need for a 2020 stimulus package in the economy and that a deal should be reached soon.

This progress raised the hopes and optimism in the market related to the U.S.’s stimulus package and weighed heavily on the U.S. dollar that ultimately added in the losses of the USD/CAD pair. Meanwhile, the WTI crude oil prices increased on Thursday as producers, including Saudi Arabia and Russia, resumed discussion to agree on how much crude to pump in 2021 after earlier talks failed to compromise how to tackle the weak oil demand coronavirus pandemic.

In late Thursday, OPEC+ announced after three days of discussion that they have agreed to increase the production by 500,000 barrels per day beginning in January. This will bring the total production cuts at the start of next year to 7.2 million BPD. On Thursday, the rising crude oil prices added strength in the commodity-linked Loonie that added further pressure on the USD/CAD pair.

On the data front, at 17:30 GMT, the Challenger Job Cuts for the year in November came in as 45.4%against the previous 60.4%. At 18:30 GMT, the Unemployment Claims from last week fell to 712K against the expected 775K and supported the U.S. dollar. At 19:45 GMT, the Final Services PMI for November rose to 58.4 against the forecasted 57.5 and supported the U.S. dollar. At 20:00 GMT, the ISM Services PMI stayed as forecasted 55.9.


Daily Technical Levels

Support Resistance

1.2898 1.2950

1.2877 1.2981

1.2847 1.3002

Pivot point: 1.2929

The USD/CAD traded in a selling mode, falling below the 1.2885 level to test the support area of the 1.2845 level. Bearish crossover of 1.2845 level can extend selling bias until 1.289 level. We opened a selling trade during the European open, but it seems to consolidate sideways ahead of the NFP figures. Here’s a trading plan for now…

Entry Price – Sell 1.28485

Stop Loss – 1.28885

Take Profit – 1.28085

Risk to Reward – 1:1

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

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

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

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Categories
Forex Market Analysis

Daily F.X. Analysis, December 04 – Top Trade Setups In Forex – NFP in Highlights! 

The eyes will remain on the U.S. NFP data on the news side, which is expected to report a slight drop from 638K to 500K during the previous month. Besides, the U.S. Average Hourly Earnings m/m and Unemployment Rate will also remain the main highlight of the day, and these may determine the USD trend for today and next week. Let’s wait for the news.

Economic Events to Watch Today  

 


EUR/USD – Daily Analysis

The EUR/USD pair was closed at 1.21474 after placing a high of 1.21744 and a low of 1.21008. EUR/USD pair extended its gains for the 3rd consecutive day on Thursday due to the U.S. dollar’s weakness amid the rising hopes for the next round of U.S. stimulus package from Congress.

The Top Democrats, Joe Biden, and Nancy Pelosi backed the bipartisan $908 billion stimulus plan on the previous day. They urged the Senate Majority Leader Mitch McConnell to drop his plan to bring a more modest package. All top Democrats, including the President-elect Joe Biden, Nancy Pelosi, and the Senate Minority Leader Chuck Schumer, said that the bill would be acceptable as a starting point. 

The need for more stimulus relief packages to support the economy was increasingly evident, with both the ADP Non-Farm Payrolls and the ISM manufacturing survey below the expectations. Meanwhile, Car and Truck sales in November also fell from October level. On the coronavirus front, the U.S. had its deadliest day since the start of the pandemic on Thursday, with over 2700 recorded deaths due to coronavirus. Over the past 2-days alone, the death toll has reached 5000. The number of hospitalized people also reached for the first time, an alarming level of 100,000. All these developments weighed heavily on the U.S. dollar on Thursday and added strength to the EUR/USD pair.

The Spanish Services PMI for November raised to 39.5 against the expected 36.5 and supported Euro and added further gains in EUR/USD pair. At 13:45 GMT, the Italian Services PMI declined to 39.4 against the forecasted 40.9 and weighed on Euro. At 13:50 GMT, the French Final Services PMI fell to 38.8 against the anticipated 49.1 and weighed on Euro. AT 13:55 GMT, the German Final Services PMI came in line with the expectations of 46.2. At 14:00 GMT, the Final Services PMI from Eurozone raised to 41.7 against the expected 41.3 and supported Euro and the EUR/USD pair raised further. At 15:00 GMT, the Retail Sales for October also surged to 1.5% against the anticipated 0.7% and supported Euro and helped the EUR/USD pair to continue its bullish momentum.

From the U.S. side, at 17:30 GMT, the Challenger Job Cuts for the year in November came in as 45.4%against the previous 60.4%. At 18:30 GMT, the Unemployment Claims from last week fell to 712K against the anticipated 775K and supported the U.S. dollar. At 19:45 GMT, the Final Services PMI for November surged to 58.4 against the anticipated 57.5 and supported the U.S. dollar. At 20:00 GMT, the ISM Services PMI stayed as anticipated 55.9.

Daily Technical Levels

Support   Resistance

1.1971       1.2122

1.1873       1.2175

1.1819       1.2273

Pivot point: 1.2024

EUR/USD– Trading Tip

On Friday, the EUR/USD pair continues to trade sideways ahead of the NFP figures, which may drive sharp movements during the U.S. session.

On the higher side, the EUR/USD may find an immediate resistance at 1.2160 and 1.2196 level. Simultaneously, the closing of candles below the 1.2103 level can send the EUR/USD pair further lower until 1.2080. Trend depends upon the NFP data.


GBP/USD – Daily Analysis

The GBP/USD closed at 1.34525 after placing a high of 1.34998 and a low of 1.33288. The GBP/USD pair rose and reached above one year’s highest level over the bullish Brexit bets and the U.S. dollar’s weakness. On Thursday, the latest news raised the British Pound over the board that suggested that the Brexit trade deal could be reached by the weekend after the two sides showed hints of compromise over fish quotas. The positive news made the British Pound the best performer on the day in the G10 currencies. 

In an attempt to break the deadlock, Mr. Barnier and Boris Johnson lowered their demands by asking to get back only 60% of the fish that E.U. boats currently catch in British waters, down from 80%. Under the reported proposal, the U.K. would hold onto increased stocks of fish that are sold in the U.K. while the E.U. will keep the similar quotas of stock that are popular in the E.U. but not in the U.K.

The compromise was reported less than a week after E.U. Brexit negotiator Michel Barnier proposed to return about 15-18% of the fish caught by European fleets in British waters to the U.K. under a free trade agreement; however, at that time, the U.K. rejected this proposal.

The progress on fisheries is progress after a months-long stalemate; however, other key sticking points, including the level-playing field and governance, need to be solved to reach a deal. The time for the end of the Brexit transition period is near, and both sides have shown hints that a deal might reach by this weekend.

All these optimistic Brexit progress reports gave the local currency British Pound strength and supported the GBP/USD pair’s upward momentum that led the pair to its one-year highest level near 1.35000 on Thursday.

On the data front, at 14:30 GMT, the Final Services PMI from Britain raised to 47.6 against the expected 45.8 and supported British Pound and added further gains in GBP/USD pair.

From the U.S. front, at 17:30 GMT, the Challenger Job Cuts for the year in November came in as 45.4%against the previous 60.4%. At 18:30 GMT, the Unemployment Claims from last week declined to 712K against the projected 775K and supported the U.S. dollar. At 19:45 GMT, the Final Services PMI for November rose to 58.4 against the projected 57.5 and supported the U.S. dollar. At 20:00 GMT, the ISM Services PMI stayed as projected 55.9.

Furthermore, the gains in GBP/USD pair on Thursday were also because of the U.S. dollar’s weakness due to the progress in talks to reach a consensus between Republicans & Democrats over the second round of stimulus talks. Joe Biden, Nancy Pelosi, and Chuck Schumer have shown their consent for the bipartisan bill of $908 billion. This progress raised the hopes for a stimulus bill and weighed on the U.S. dollar that added strength to the GBP/USD pair.

Daily Technical Levels

Support   Resistance

1.3286       1.3441

1.3209       1.3519

1.3131       1.3596

Pivot Point: 1.3364

GBP/USD– Trading Tip

The GBP/USD is trading sideways in between a fresh trading range of 1.3305 – 1.3445. Breakout of this range can lead the Cable price towards the 1.3517 level. The volatility seems low ahead of the Christmas holidays. However, the European session can trigger a buying trend until the 1.3515 level, while support continues to stay at the 1.3305 level. A bearish breakout of the 1.3305 level can trigger selling until the 1.3212 level. The MACD and RSI are suggesting a bullish bias in the market. Let’s consider taking buying trades over 1.3305 and 1.3447 level today.


USD/JPY – Daily Analysis

The USD/JPY pair was closed at 103.841 after placing a high of 104.534 and a low of 103.669. The USD /JPY pair dropped to its lowest since November 18 on Thursday due to broad-based U.S. dollar weakness.

The U.S. Dollar Index extended its losses for 3rd consecutive day on Thursday and fell to a 31-month lowest level below 91.10 after the hopes for the next round of stimulus raised in the market. The top three Democratic Leaders, President-elect Joe Biden, House Speaker Nancy Pelosi, and Senate Minority Leader Chuck Schumer, backed the bipartisan proposal for a coronavirus relief package worth $908 billion. They all urged the Senate Majority Leader Mitch McConnell to drop his plans of bringing a more modest package back to the floor of the upper chamber.

Both parties agree that more relief aid should be delivered to Americans to curb the coronavirus pandemic’s effects but have differences over the size, method, and healthcare system. The renewed efforts to strike a deal followed a months-long deadlock over the second stimulus relief package and weighed heavily on the greenback that added losses in the USD/JPY pair.

On the data front at 17:30 GMT, the Challenger Job Cuts for the year in November came in as 45.4%against the previous 60.4%. At 18:30 GMT, the Unemployment Claims from last week dropped to 712K against the estimated 775K and supported the U.S. dollar, and capped further losses in the USD/JPY pair. At 19:45 GMT, the Final Services PMI for November rose to 58.4 against the estimated 57.5 and supported the U.S. dollar. At 20:00 GMT, the ISM Services PMI stayed as estimated at 55.9.

Furthermore, the U.S. dollar was also weak because of the rising cases of coronavirus in the U.S. The U.S. saw its deadliest day since the start of the pandemic on Thursday after 2,700 deaths were reported in a single day. Over the past two days only, the death toll has reached 5,000 in the U.S. from the coronavirus, and the hospitalization rate has also increased, with more than 100,000 cases reported to be hospitalized in a single day.

These raised concerns for the U.S. economy as many states were still under strict restrictive measures, and the economic activities there were still affected. The rising number of deaths might weigh more on the local currency. The U.S. dollar came under pressure and dragged the USD/JPY pair further on the downside.

Daily Technical Levels

Support   Resistance

104.13       104.54

103.95       104.77

103.72       104.95

Pivot point: 104.36

USD/JPY – Trading Tips

The USD/JPY has violated the sideways trading range of 104.600 – 104.200, and now it’s trading at 103.876 level. On the lower side, the pair has formed a triple bottom level, supporting the pair around 103.700 level. Investors seem to wait for the U.S. NFP and unemployment rate figures to determine further U.S. dollar trends. On the lower side, the USD/JPY may head towards the 103.200 level upon a bearish breakout of the 103.750 support level. While resistance stays at 104.350 today. Good luck

Categories
Crypto Market Analysis

Daily Crypto Review, Dec 4 – Bitcoin Above $19,000; Ether Fighting for $600

The cryptocurrency sector has spent the day trying to regain its recent highs, with Ethereum breaking $600 and Bitcoin breaking $19,000. Bitcoin is currently trading for $19,314, representing an increase of 1.14% compared to our last report. Meanwhile, Ethereum’s price has increased by 2.15% on the day, while XRP managed to lose 0.52%.

 Daily Crypto Sector Heat Map

The past 24 hours have passed without any major winners or losers in the top100 cryptos. Ren gained 5.23% in the past 24 hours, making it the most prominent daily gainer in the top100. It is closely followed by Band Protocol’s 4.44% and VeChain’s 4.08% gain. On the other hand, Decentraland lost 4.98%, making it the most prominent daily loser. It is followed by Uniswap’s loss of 4.79% and Kyber Network’s loss of 4.49%.

Top 10 24-hour Performers (Click to enlarge)

Bottom 10 24-hour Performers (Click to enlarge)

Bitcoin’s market dominance has barely changed since we last reported, with its value currently being 62.4%. This value represents a difference of 0.1% to the upside when compared to yesterday’s value.

Daily Crypto Market Cap Chart

The crypto sector capitalization has decreased just slightly in the past 24 hours. Its current value is $570.51 billion, representing a $0.54 billion decrease compared to our previous report.

_______________________________________________________________________

What happened in the past 24 hours?

_______________________________________________________________________

_______________________________________________________________________

Technical analysis

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Bitcoin

Bitcoin has spent the day trying to break its immediate resistance (which is sitting at $19,490). However, all attempts throughout the day have been unsuccessful, which prompted Bitcoin to pull back slightly. However, the largest cryptocurrency by market cap has established its presence above $19,000 with confidence once again.

Bitcoin is quite unpredictable at the moment, making safe trades hard to find. Traders should pay attention to BTC volume and enter trades with a high profit/loss ratio to quickly mitigate the risk of things turning from good to bad.

BTC/USD 1-hour chart

Bitcoin’s technicals on all time-frames are bullish, but they all show some signs of neutrality (or even bearishness) alongside the overall bullishness.

BTC/USD 1-day Technicals

Technical factors (4-hour Chart):
  • Price is currently above its 50-period EMA and slightly above its 21-period EMA
  • Price is at its middle Bollinger band
  • RSI is neutral (56.72)
  • Volume is average
Key levels to the upside          Key levels to the downside

1: $19,500                                 1: $19,000

2: $19,666                                 2: $18,790

3: $20,000                                 3: $18,500

Ethereum

Ethereum has spent the day following Bitcoin’s movement, with its price first pushing towards the upside and then pulling back as it was unable to break a certain level (in this case, $620. On the other hand, the second-largest cryptocurrency by market cap has seemingly established its presence above $600, though not with nearly as much conviction as Bitcoin did.

If Ethereum traders followed our advice from yesterday’s analysis, they would have made quite a good profit by longing Ether after it broke $600, with a stop-loss set slightly below this level. While trading Ethereum is still quite possible, the current high correlation with Bitcoin’s movement makes Bitcoin a (possibly) better option to trade, simply due to fewer variables a trader would have to consider.

ETH/USD 1-hour Chart

Ethereum’s daily and monthly overviews are completely bullish, while its 4-hour and weekly time-frames show some form of neutrality next to the overall bullishness.

ETH/USD 1-day Technicals

Technical Factors (4-hour Chart):
  • The price is currently above its 50-period and slightly above its 21-period EMA
  • Price is at its middle Bollinger band
  • RSI is neutral (57.22)
  • Volume is average
Key levels to the upside          Key levels to the downside

1: $620                                     1: $600

2: $630                                     2: $510 

3: $735                                      3: $500

Ripple

The fourth-largest cryptocurrency by market cap has had another extremely slow day, with its price barely fluctuating at all. The low volume and low volatility are continuing throughout the week, with XRP just barely moving to the downside as a response to the minor pullback caused by Bitcoin’s movement.

Trading XRP is a near-impossible feat at the moment, as the cryptocurrency currently shows no volatility and (therefore) no trade opportunities.

XRP/USD 2-hour Chart

XRP’s daily and monthly overviews are completely bullish, while its weekly time-frames show bullish sentiment with a hint of neutrality. Its 4-hour overview, however, is completely bearish.

XRP/USD 1-day Technicals

Technical factors (4-hour Chart):
  • The price is (at the moment of writing) slightly above its 50-period EMA and slightly below its 21-period EMA
  • Price is slightly below its middle Bollinger band
  • RSI is neutral (48.53)
  • Volume is slightly below average
Key levels to the upside          Key levels to the downside

1: $0.666                                   1: $0.6

2: $0.78                                     2: $0.596

3: $0.79                                   3: $0.535

Categories
Forex Elliott Wave Forex Market Analysis

Is GBPUSD Preparing a Reversal Move?

The GBPUSD pair is seen advancing in an ending diagonal pattern inside an incomplete flat pattern of Minor degree, identified in green, which is in progress since September 01st when the Sterling found resistance 1.34832. 

 

Technical Overview

The previous 8-hour chart exposes the advance in a potential flat pattern (3-3-5), which currently develops its wave B of Minor degree identified in green. In this context, once the current corrective rally ends, the next potential move, according to the Elliott Wave theory, could correspond the wave C. This movement should follow an internal structure subdivided into five wave segments.

Analyzing wave B’s internal structure, currently, we see the price advancing in its wave ((c)) of Minute degree labeled in black. In this context, according to the textbook, the pattern identified in the current wave ((c)) has the shape of an incomplete ending diagonal pattern.

On the other hand, looking at the price and time relationship presented in the first chart, it is interesting to compare the elapsed time of the current wave B with wave A. This comparison suggests that the current wave B can be thought of as a corrective rally; thus, the next move could become an aggressive decline. 

Nevertheless, considering that the current wave B remains in progress, the short-term bias is still on the bullish side.

Technical Outlook

The next 8-hour chart shows the GBPUSD advance in its fifth wave of Minuette degree, labeled in blue, which belongs to the wave ((c)), in black, suggesting a terminal movement.

In this context, the price’s test of the upper sideways channel trendline suggests that the Pound Sterling could develop an expanded flat pattern. This Elliott Wave pattern’s implication makes us consider a strike over the origin of wave A located at 1.34832, where the pair should start to decline, developing its wave C in green.

Finally, both the ending diagonal pattern and the expanded flat pattern requires the pair to confirm the breakdown below the demand zone between 1.33135 and 1.32876. If the pair’s price action confirms this breakdown, it could move down up to the level of 1.29144.

Categories
Forex Fundamental Analysis

GBP/USD Global Macro Analysis – Part 3

Introduction

The exogenous analysis will cover international aspects that impact both the UK and the US and how they influence the GBP/USD price. These factors include:

  • Good trade balance
  • Interest rate differential
  • GDP growth differential

GBP/USD Exogenous Analysis – Summary 

The score for the exogenous analysis of the GBP/USD pair is -3. This deflationary score implies that we should expect that the pair will adopt a bearish trend in the near term.

Goods trade balance

The goods trade balance is the difference between the value of goods a country imports and its exports. When the balance is negative, it means that the country is importing more than it exports. If the goods trade balance is a surplus, it means that a country’s value of exports is more than its imports.

In September 2020, the UK’s goods trade deficit increased to £9.35 billion while that of the US increased to $80.29 billion. Based on the correlation between t goods trade balance and the price of GBP/USD, we assign it an inflationary score of 2. It means if the goods trade balance keeps widening between the two countries, we can expect that the GBP/USD pair will continue being bullish.

The UK and the US Interest rate differential

This is the difference between the interest rate set by the Bank of England and the interest rate fixed by the US Federal Reserve. Capital tends to flow towards the economy with a higher interest rate since investors are bound to earn higher returns.

The BOE has set the interest rate at 0.1%, while the FED has it at 0.25%. therefore, the interest rate differential for the GBP/USD pair is 0.1% – 0.25% = -0.15%. Based on the interest rate differential, the GBP/USD pair should have a bearish trend. Therefore, we assign it a score of -3.

GDP growth differential

The actual size of the GDP varies from country to country. However, we can compare the rate at which they grow and analyse the impact of this growth rate on the exchange rate.

In the third quarter of September 2020, the UK GDP expanded by 15.5% while that of the US expanded by 33.1%. Over the years, we can observe that the US GDP growth has been at a faster rate than that of the UK. In this case, we assign a deflationary score of -2 on the UK and the US GDP growth rate differential. That means if the US economy keeps expanding at a faster rate, we can expect a bearish GBP/USD in the near term.

Our technical analysis also supports the forecasted bearish trend in the near term. Note that the GBP/USD pair has failed to breach the upper Bollinger band forming a resistance level for the past two years.

We hope you found this analysis useful and informative. Let us know if you have any questions by commenting below. All the best.

Categories
Forex Fundamental Analysis

GBP/USD Global Macro Analysis – Part 1 & 2

Introduction

To properly understand the dynamics of the price of the GBP/USD pair, we’ll conduct endogenous and exogenous analyses of the UK and the US economies.

The endogenous analysis will focus on the significant fundamental economic indicators that drive economic growth in either country. The exogenous analysis will dig deeper into how both the US and the UK economies interact with each other in terms of international trade that impact the currency exchange.

Ranking Scale

Both the endogenous and the exogenous factors that we will analyse will be ranked on a sliding scale from -10 to +10. A negative score means that the indicator resulted in currency depreciation, while a positive score implies that it led to currency appreciation.

USD Endogenous Analysis – Summary

The USD endogenous factors recorded a score of -19.1, implying a deflationary effect on the USD. This essentially means that according to these indicators, the USD has lost its value since the beginning of this year.

You can find the complete USD Endogenous Analysis here.

GBP Endogenous Analysis – Summary

The endogenous analysis of the UK economy results in an expansionary score of 2. Therefore, we could expect the GBP increased in 2020.

Markit Manufacturing PMI

This is a survey done on about 600 purchasing managers in the manufacturing industry, who rate the level of the business environment such as prices, new orders, inventories, supply deliveries, labour conditions, and production levels.

This is a leading indicator for the economy because businesses react almost instantly to the changing operating environment, and the purchasing managers have the most relevant insight. In November 202, the UK Manufacturing PMI was 55.2, showing that the economy is undergoing a sustained recovery. Due to its low correlation with the GDP, we assign an inflationary score of 3.

UK inflation

The CPI is based on a monthly survey done by the Office for National Statistics. This is done by comparing the current average of sample consumer items by the previous month’s prices. The BOE uses the data to adjust interest rates and QE levels to set inflation targets for the economy.

Rising inflation levels lead to higher interest rates, which makes CPI a vital currency valuation indicator. The UK inflation rate increased by 0.7% in October 2020 but is still lower than the rate in the pre-pandemic period. Based on our correlation analysis. We assign it a score of -4.

Manufacturing Production

It measures the change in the total value of inflation-adjusted output by the manufacturers in the whole economy. It is a leading indicator of the economy’s performance since production levels adjust quickly to the business cycles and heavily dependent on consumer conditions like employment changes and earning levels.

Manufacturing contributes about 80% of the UK’s industrial output and accounts for up to 42.4% of GDP changes. The year-on-year manufacturing production change in September 2020 was -7.9%. This marks the smallest decline since the onset of the coronavirus pandemic. Due to its high correlation with GDP, we assign it an inflationary score of 6.

Claimant count change

It measures the change in the number of people who are seeking unemployment benefits. Hence, it is the primary indicator of unemployment levels, which makes it a vital signal of consumer expenditure levels and labour market conditions. In the UK, claimant count change is considered the best measure of the employment situation, and it accounts for 30% of changes in the GDP.

In September 2020, the number of people in the UK who claimed unemployment benefits dropped by 29800. However, the unemployment rate remains at yearly highs of 4.8%. For this reason, we assign a score of -5.

Industrial Production

It measures the change in output from the mines, manufacturers, and utilities, adjusted for inflation. While manufacturing makes up 80% of the industrial production, mines and utilities make up 20%, and their effects on the real economy are thus overshadowed.

It is a significant leading indicator of the economy’s health since industrial activities correspond to labour market conditions and sensitive to business cycles. In September 2020, the UK industrial MoM production increased by 0.5%. However, on a YoY basis, it is down 6.3% from September 2019. In this case, we assign industrial production a score of -3.

Retail Sales

It measures the change in the inflation-adjusted value of all sales at the retail level in the whole economy. It is the primary measure of how much consumer expenditure accounts for most of the country’s economic activity.

In October 2020, the UK MoM retail sales increased by 1.2%, which is the 6th consecutive increase in retail sales from the slump recorded at the height of the coronavirus pandemic. Based on its correlation with GDP, we assign retail sales an inflationary score of 4.

Markit Services PMI

This is a survey on about 400 purchasing managers in the services industry, who rate the business environment using factors such as employment, new orders, pricing, inventories, and supplier deliveries. A score of above 50 signifies an expansion, while below 50 indicates a contraction in the services industry.

In November 2020, the Marking UK Services PMI was 45.8 – a significant drop from 51.4 in October. Although the Services PMI has increased from the April lows, it is still lower than in January 2020. Combined with its low correlation with the UK GDP, we assign a deflationary score of -3.

United Kingdom Public Sector Net Debt to GDP

This is also called Government Debt to GDP Ratio. Most investors, bilateral and multilateral lenders use this ratio to determine a country’s ability to service any debt they take on. Naturally, when the ratio is higher, it means that the government is piling on more debt, but the GDP is not increasing at the same rate. Since higher GDP would mean higher sources of revenue, if the GDP is not increasing at the same pace as the amount of debt, it implies that the government might struggle with debt repayment.

In 2020, the UK Public Sector Net Debt to GDP is projected to reach historic highs of 96.6%. This increase is mainly attributed to governments’ efforts to prop up the economy through aggressive expansionary policies during the pandemic. Based on our correlation analysis, the increase in the United Kingdom Public Sector Net Debt to GDP in 2020 served its purpose to avoid irreversible recessions. We, therefore, assign an inflationary score of 4.

In our next article, we will analyze the Exogenous factors of both USD and GBP to come to an appropriate conclusion.

Categories
Forex Fundamental Analysis

Understanding ‘US TIC Net Long-Term Transactions’ Fundamental Forex Driver

Introduction

When foreign investors prefer investing in the domestic economy, they strongly believe that they can get better returns than in any other market. The US is considered the leading economy in the world; therefore, hence US securities are highly trusted by most investors. Similarly, since the USD is the most traded currency in the international market, its value would fluctuate depending on investors’ optimism in the capital and money market of the US.

Understanding US TIC Net Long-Term Transactions

As an economic indicator, the US TIC Net Long-Term Transactions measures the net flow of financial securities in the US economy. The financial securities under consideration include; Treasury and agency securities, corporate bonds, and equities.

Therefore, the ‘net’ in the US TIC Net Long-term Transactions means the difference between US financial securities’ gross purchases and sales by foreign investors. This data provides a vivid overview of the participation of foreigners in the US capital and money markets. When the US TIC net long-term transactions data is positive, it means that more foreigners are buying into the US economy than those selling. Similarly, when the US TIC net long-term transactions data is negative, it means more foreigners are exiting the US economy compared to those buying into the economy.

So, what is TIC? TIC stands for Treasury International Capital, a financial report from the US Department of Treasury. It shows the flow of capital into and out of the US in both the short and long term. The TIC report is published monthly and quarterly; it details the flow of capital explicitly in the sale and purchase of US financial securities.

According to the TIC reports, the classification of foreigners does not necessarily mean individuals and institutions from abroad. Foreigners in this context also include foreign branches of US institutions. For example, if a US bank has a branch in London, that branch is considered a foreigner.

Using US TIC Net Long-Term Transactions in Analysis

The main point of the US TIC Net Long-Term Transactions Report is it shows the demand for USD stocks and investors’ sentiment towards the US economy. Let’s break down the US TIC Net Long-Term Transactions depending on the market.

If the US TIC net long-term transactions, it could signal that the US treasuries and bonds are in high demand. First, you should know why investors would demand more of US treasuries. The US treasuries and bonds are considered to be risk-free. The reason for this is because investors are guaranteed to receive a fixed amount of coupon rate until maturity.

More so, the US treasuries also come with an inherent guarantee that the US government will not default the interest payment and that investors will receive their principal upon maturity. Furthermore, the US’s interest rates are relatively higher than other developed nations; this means that investors in the US government securities stand to profit more by investing in the US.

The level of purchase of the US TIC net long-term transactions also says a lot about the expected inflation. In the long term, most investors worry that if the rate of inflation increases rapidly, it will reduce their profits. Thus, any investor would prefer to invest in a country with stable inflation, which would ensure that their returns are not severely affected.

Therefore, when the US TIC net long-term transactions are positively increasing, it means that foreign investors expect the US economy to be relatively stable over the long term. It is taken as confidence that the Federal Reserve will keep long term inflation in check.

Source: St. Louis FRED

Conversely, if the US TIC net long-term transactions are negative, it implies that there are more sellers than buyers. This scenario could imply that foreign investors believe that the long-term inflation rate will exceed the rate of returns they will receive from their investments. Since their expected real returns will be diminished, they prefer to invest their money in other economies.

The US TIC net long-term transactions can also be used to show impending recessions and optimism about economic recoveries. Let’s use the recent coronavirus pandemic as an example. In the first quarter of 2020, the US TIC net long-term transactions plunged to historic lows. It means that more foreign investors were exiting the US capital and money markets and presumably investing their funds elsewhere. This net outflow was a result of the uncertainty of what the pandemic might bring.

 Source: Trading Economics

In the second quarter of 2020, the US TIC net long-term transactions jumped back to positive territory, implying that foreign investors were pouring back into the US capital and money markets. Note that this net inflow coincides with the passing of the $2 trillion stimulus package. Therefore, we can argue that the net inflow of US TIC net long-term transactions was a vote of confidence by foreign investors that in the long term, the US economy will rebound from the pandemic-induced recession.

Impact of US TIC Net Long-Term Transactions on Currency

The impact of the US TIC net long-term transactions on the USD is pretty straightforward. In the international market, foreigners are obliged to convert their currencies into the USD. Therefore, an increase in the US TIC net long-term transactions means that the demand for the USD increases as well. Consequently, the increase in the demand for the USD makes it appreciate relative to other currencies.

Conversely, when US TIC net long-term transactions show net outflows, the USD will depreciate relative to other currencies. This is because when foreigners sell the US financial securities, they will convert the USD to their domestic currencies when repatriating their money.

Data Sources

The US Department Of The Treasury is responsible for collating and publishing the monthly and quarterly US TIC net long-term transactions. Trading Economics has detailed historical data on the US TIC net long-term transactions.

How US TIC Net Long-Term Transactions Release Affects The Forex Price Charts

The latest monthly publication of the US TIC net long-term transactions was on October 16, 2020, at 4.00 PM EST. The release can be accessed at Investing.com. Moderate volatility on the USD can be expected when the US TIC net long-term transactions report is released.

In August 2020, the US TIC net long-term transactions were $27.8 billion compared to $11.3 billion in July 2020. In theory, this increase should be positive for the USD.

Let’s see how this release impacted the GBP/USD pair.

GBP/USD: Before US TIC Net Long-Term Transactions Release on October 16, 2020, 
just before 4.00 PM EST

Before the publication of the US TIC net long-term transactions, the GBP/USD pair was trading in a subdued uptrend. The 20-period MA was almost flattened with candles forming just above it.

GBP/USD: After US TIC Net Long-Term Transactions Release on October 16, 2020, 
at 4.00 PM EST

After the publication of the US TIC net long-term transactions, the pair formed a 5-minute bearish candle. Subsequently, GBP/USD adopted a bearish trend showing that the USD significantly strengthened against the GBP. The 20-period MA steeply fell as candles formed further below it.

Bottom Line

From this analysis, it is evident that the US TIC net long-term transactions release has a significant impact on the forex market. The report shows the confidence of investors in the US economy and the demand for the US Dollar.

Categories
Forex Course

185. Knowing Which News Release To Trade Is Crucial!

Introduction

Before you develop your trading strategy around the news releases, you first need to decide which news you will use for trading. As we mentioned in our previous course, different economic releases have a varying impact on the forex market. Since the aim of any trade is to gain as many pips as possible, it is only natural that you trade news releases that create high impact – those which can significantly move the forex market in the short-term; or even the longer-term.

The primary way to identify high-impact news releases is by establishing which economic indicator gives a relevant, most current, and comprehensive overview of the economy. The high-impact news releases usually cover these aspects;

Central banks’ monetary policies: These policies can impact future economic growth – both in the short and long term.

Labour market reports: Such reports tend to be of the changes in the previous month. They are a leading indicator of changes in household demand, which is a major contributor to economic growth.

Manufacturing and industrial activities: These sectors are usually among the largest employers in the labor market. Monitoring their growth can be a leading indicator of GDP growth and changes in the unemployment levels.

The services industry: This industry is the first to be impacted by changes in consumer demand.

You don’t have to stress about determining which specific economic indicators are high-impact. The economic calendars take care of this for you. Furthermore, there are several economic calendars out there, so you can compare multiple calendars and check put the consensus about the impact magnitude of the various news releases.

Note that these calendars have a legend to indicate the magnitude of the news release. They show whether the news will have high, medium, or low volatility.

Here’s our recommended list of high-impact economic indicators.

  • GDP releases
  • Inflation indicators like CPI, PPI, and PCE
  • Interest rate decision
  • Unemployment rate and wages data
  • Industrial production, factory orders, or manufacturing production
  • Retail sales
  • Surveys on the manufacturing sector and services industry
  • Sentiment surveys on consumers and businesses

It is important to note that geopolitical developments can be happenstance. These events could include upcoming elections in major economies, natural disasters like tsunamis, pandemics, and geopolitical conflicts. When these events happen, the impact of the release of the economic indicators may change.

For example, towards the end of Q2 in 2020, the impact of these economic indicators was heightened. The reason is that they signaled the rate of economic recoveries after the coronavirus-induced recessions. Furthermore, they showed whether or not the expansionary policies adopted impacted the economy as expected.

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Categories
Forex Market Analysis

Daily F.X. Analysis, December 03 – Top Trade Setups In Forex – Services PMI under Spotlight! 

The focus will remain on the range of services PMI numbers from the Eurozone and U.K. on the data front. Most of the data is anticipated to be neutral; nevertheless, the U.S. Unemployment Claims and ISM Services PMI will be the main highlight of the day.

Economic Events to Watch Today  

 


EUR/USD – Daily Analysis

The EUR/USD closed at 1.21150 after placing a high of 1.21182 and a low of 1.20398. The EUR/USD pair rose to its highest since April 2018 on Wednesday amid rising optimism from the vaccine front and the fiscal stimulus hopes.

On Wednesday, the U.K. regulator approved Pfizer and BioNtech’s vaccine for emergency use to fight against the coronavirus. This news added further support to the already improved risk sentiment in the market and helped the EUR/USD pair to rise as it is a riskier asset.

On the data front, at 12:00 GMT, the German Retail Sales for October raised to 2.6% against the projected 1.3% and supported Euro that added further gains in EUR/USD pair. At 13:00 GMT, the Spanish Unemployment Change dropped to 25.3K against the estimated 54.5K and supported Euro and added further gains in EUR/USD pair. At 14:00 GMT, Italian Monthly Unemployment Rate for October declined to 9.8% against the forecasted 9.9% and supported Euro and helped EUR/USD rise. At 15:00 GMT, the PPI for October raised to0.4% against the forecasted 0.2% and kept the single currency Euro and gave additional support to EUR/USD pair. The Unemployment Rate in Eurozone remained flat at 8.4%.

At 18:15 GMT, the ADP Non-Farm Employment Change for November fell to 307K against the anticipated 433K and weighed on the U.S. dollar and added further in EUR/USD pair. After the release of macroeconomic data on Wednesday, the currency pair EUR/USD raised sharply and surpassed the 1.2100 level as all the data was in favor of it. Meanwhile, the lawmakers in Washington continued their negotiations related to a fiscal stimulus deal to support the U.S. economy. The negotiations weighed on local currency and made the U.S. dollar weak across the board. Furthermore, the optimism about a $908 billion package also boosted the market’s risk sentiment and weighed on the U.S. dollar that added additional gains in EUR/USD pair.

The U.S. dollar was also weak because of the rising number of coronavirus cases in the U.S. On Wednesday, the total number of deaths from coronavirus set a new record in a single day, and hospitalizations also reached an all-time high. On Wednesday, about 100,200 patients of coronavirus were hospitalized in the U.S. The U.S. Dollar Index on Wednesday slumped to its lowest level in more than 30 months at 91.10 and supported the upward momentum of the EUR/USD pair.

Daily Technical Levels

Support   Resistance

1.1971       1.2122

1.1873       1.2175

1.1819       1.2273

Pivot point: 1.2024

EUR/USD– Trading Tip

The bullish bias of the EUR/USD continues to dominate the market as the pair surged further higher until the 1.2117 level. On the higher side, the EUR/USD may find an immediate resistance at 1.2150 and 1.2196 level. Simultaneously, the closing of candles below the 1.2153 level can send the EUR/USD pair further lower until 1.2080. On the 4 hour timeframe, the EUR/USD has formed an upward channel, which is suggesting odds of further buying trend in the pair. The MACD is forming histograms above 0, suggesting odds of an upward trend in the market. Let’s consider the buying trend until the 1.2200 level today. 


GBP/USD – Daily Analysis

The GBP/USD closed at 1.33651 after placing a high of 1.34410 and a low of 1.32875. The British Pound erased gains and slipped to a 3-week lowest level on Wednesday after the E.U.’s chief Brexit negotiator said that progress in talks had stalled and cooled the expectations that a deal was near.

Michel Barnier said that a deal was not guaranteed and signaled that differences over key issues, including access to the U.K. fishing waters and level playing field rules, were still there. A day before this news, reports suggested that post-Brexit trade talks had reached the so-called tunnel. Tunnel refers to a situation where both parties don’t leave until a consensus is reached.

Ahead of the update, there were signs the ongoing impasse was starting to frighten some members, who have called on the E.U. to start preparation for a no-deal scenario. There likely could be another twist to come in Brexit talks in the days ahead with the U.K.’s proposal for a new finance bill. This bill undermines some parts of the original Brexit Withdrawal agreement, and it could dent the little progress in negotiations seen so far.

Whereas, Barnier said that if the U.K. government moved ahead next week with draft clauses in the Finance Bill that were inconsistent with the Withdrawal Agreement, then the talks will come under crisis.

All these negative reports depressed Brexit’s expectations and started to weigh on British Pound that added losses in GBP/USD pair. The time for an end of Brexit transition period on December 31 has come near, and if a deal has not been reached by then, U.K. will have to follow WTO rules and regulations while trading with the E.U.

Meanwhile, on the data front, at 05:01 GMT, the BRC Shop Price Index for the year dropped to -1.8% against the forecasted -1.3% and weighed on British Pound and added pressure on GBP/USD pair. On the U.S. front, at 18:15 GMT, the ADP Non-Farm Employment Change for November dropped to 307K against the anticipated 433K and weighed on the U.S. dollar, and capped further losses in the GBP/USD pair.

Daily Technical Levels

Support   Resistance

1.3340       1.3468

1.3263       1.3519

1.3212       1.3595

Pivot point: 1.3391

GBP/USD– Trading Tip

The GBP/USD is trading sideways in between a fresh trading range of 1.3305 – 1.3445. Breakout of this range can lead the Cable price towards the 1.3517 level. The volatility seems low ahead of the Christmas holidays. However, the European session can trigger a buying trend until the 1.3515 level, while support continues to stay at the 1.3305 level. A bearish breakout of the 1.3305 level can trigger selling until the 1.3212 level. The MACD and RSI are suggesting a bullish bias in the market. Let’s consider taking buying trades over 1.3305 and 1.3447 level today.


USD/JPY – Daily Analysis

The USD/JPY pair was closed at 104.410 after placing a high of 104.749 and a low of 104.223. The USD/JPY pair raised for the third consecutive day on Wednesday amid the market’s optimism. However, most of USD/JPY’s daily gains were lost during the late trading session as U.S. stimulus raised.

The risk sentiment in the market was improved after the successful vaccine development from famous drug companies. Pfizer and BioNtech even received approval from the U.K. administration for emergency use authorization of their vaccine on Wednesday. Pfizer & BioNtech became the first in the world to get approval for the widespread use of their vaccine. It means that their vaccine can now be used to prevent the coronavirus officially, and it raised the risk sentiment in the market that ultimately added weight on the Japanese Yen due to its safe-haven nature; thus, it supported the upward momentum of the USD/JPY pair.

The Monetary Base for the year dropped to 16.5% against the forecasted 17.2%. At 09:59 GMT, Consumer Confidence raised to 33.7 against the anticipated 33.0 and supported the Japanese Yen that capped additional gains in the USD/JPY pair on Wednesday. At 18:15 GMT, the ADP Non-Farm Employment Change for November fell to 307K against the estimated 433K and weighed on the U.S. dollar that limited the gains of the USD/JPY pair on Wednesday.

The prospects of a U.S. coronavirus relief package weighed on the greenback and forced the currency pair USD/JPY to lose most of its daily gains. As the $1.4trillion spending bill’s support increased, the top U.S. economic officials on Tuesday advised Congress to present more assistance for small businesses to survive during the pandemic.

Meanwhile, Philadelphia Federal Reserve Bank President Patrick Harker said on Wednesday that due to the increased spread of the coronavirus and delayed fiscal help along with the permanent job loss of some workers, the U.S. economic growth has been moderate.

Harker also forecasted moderate growth for the rest of this year and the first quarter of 2021. He also predicted that the economy would stay below pre-pandemic levels. Harker also said that if the vaccine is widely available by next spring and summer, then the growth will pick up in the second half of the next year. Harker added that more financial support was needed to get the economy to that point and to support low-income households.

Harker also said that the Central Bank’s emergency lending programs should be extended beyond next year as they are set to expire on December 31. Harker’s comments came in after Treasury Secretary Steven Mnuchin asked the Fed to return the unused funds. All these comments added pressure on the U.S. dollar as the continuous demand for a second stimulus bill weighed on local currency.

Daily Technical Levels

Support   Resistance

104.13       104.54

103.95       104.77

103.72       104.95

Pivot point: 104.36

USD/JPY – Trading Tips

The USD/JPY is trading with a sideways trading range of 104.600 – 104.200, holding below an immediate resistance level of 104.600. On the lower side, the safe-haven currency pair may find support at the 103.719 level. The pair seems to disrupt the resistance level of 104.600, and if this happens, the USD/JPY may soar until the next resistance area of 105.030 level. The MACD and RSI support the buying trend, but we should only take buying positions over the 104.600 level today. Good luck!

Categories
Crypto Market Analysis

Daily Crypto Review, Dec 3 – PayPal and BlackRock Heads Extremely Bullish on Bitcoin; Crypto Sector Consolidating

The cryptocurrency sector has spent the day stabilizing after a sudden drop. Bitcoin is currently trading for $18,997, representing an increase of 0.48% compared to our last report. Meanwhile, Ethereum’s price decreased 0.64% on the day, while XRP managed to lost 0.01%.

 Daily Crypto Sector Heat Map

Decred gained 39.22% in the past 24 hours, making it the most prominent daily gainer in the top100. It is closely followed by Elrond’s 30.56% and Curve DAO Token’s 10.36% gain. On the other hand, Nexo lost 5.60%, making it the most prominent daily loser. It is followed by Status’s loss of 2.72% and Augur’s loss of 1.66%.

Top 10 24-hour Performers (Click to enlarge)

Bottom 10 24-hour Performers (Click to enlarge)

Bitcoin’s market dominance hasn’t changed since we last reported, with its value currently staying at 62.3%. This value represents a 0% difference when compared to yesterday’s value.

Daily Crypto Market Cap Chart

The crypto sector capitalization has increased significantly in the past 24 hours. Its current value is $571.05 billion, representing a $10.27 billion increase compared to our previous report.

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What happened in the past 24 hours?

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Technical analysis

_______________________________________________________________________

Bitcoin

Bitcoin has spent the day recovering from yesterday’s pullback and trying to regain $19,000. However, this level has proven to be a solid resistance zone, and it is unsure whether Bitcoin will manage to push over it. On the other hand, the overall sentiment around the largest cryptocurrency by market cap is incredibly bullish, mostly due to the massive investments coming from the institutional side.

Bitcoin is very volatile and unpredictable at the moment, making the trades quite hard to pull off. Traders should pay attention to volume and watch smaller time-frames and enter trades with a high profit/loss ratio to mitigate the risk when things go bad.

BTC/USD 4-hour chart

Bitcoin’s short-term technicals are completely bullish, while its weekly and monthly technicals show some signs of neutrality alongside the overall bullishness.

BTC/USD 1-day Technicals

Technical factors (4-hour Chart):
  • Price is above its 50-period EMA and slightly above its 21-period EMA
  • Price is at its middle Bollinger band
  • RSI is neutral (54.55)
  • Volume is average
Key levels to the upside          Key levels to the downside

1: $19,000                                 1: $18,790

2: $19,500                                 2: $18,500

3: $19,666                                  3: $18,240

Ethereum

Ethereum has spent the day mostly flat and hovering right under the $600 mark. The second-largest cryptocurrency by market cap has continuously failed to break the immediate resistance level but did not back down from it.

Ethereum traders have a good chance of catching a safe trade with a stop-loss slightly below $600 if Ether pushes above $600 (either because of its own price movement or as a response to Bitcoin breaking $19,000 with conviction).

ETH/USD 4-hour Chart

Ethereum’s daily and monthly technicals are completely bullish, while its 4-hour and weekly time-frames show some neutrality next to the overall bullishness.

ETH/USD 1-day Technicals

Technical Factors (4-hour Chart):
  • The price is above its 50-period and at its 21-period EMA
  • Price is at its middle Bollinger band
  • RSI is neutral (54.35)
  • Volume is average
Key levels to the upside          Key levels to the downside

1: $600                                     1: $510

2: $630                                     2: $500 

3: $735                                      3: $490

Ripple

The fourth-largest cryptocurrency by market cap has had another slow day, with its price fluctuating between $0.6 and $0.64. The $0.6 support level seems to be holding quite well, while the $0.625 level got ignored several times, which made us remove it from the key levels section.

Trading XRP is almost impossible as the cryptocurrency currently has no volatility and (therefore) no trade opportunities.

XRP/USD 4-hour Chart

XRP’s daily and monthly technicals are completely bullish, while its 4-hour and weekly time-frames’ show bullish sentiment with a hint of neutrality.

XRP/USD 1-day Technicals

Technical factors (4-hour Chart):
  • The price is slightly above its 50-period EMA and at its 21-period EMA
  • Price is at its middle Bollinger band
  • RSI is neutral (51.08)
  • Volume is slightly below average
Key levels to the upside          Key levels to the downside

1: $0.666                                   1: $0.6

2: $0.78                                     2: $0.596

3: $0.79                                   3: $0.535

 

Categories
Forex Market Analysis Forex Technical Analysis

NZDJPY Fills the Gap Unfilled Since May 2019

The NZDJPY advanced 5.70% in November, consolidating the price in the extreme bullish sentiment zone. Likewise, as illustrated in the following daily chart, during December’s kickoff trading, the cross reached the yearly high of 73.831, filling the gap that opened on May 06th, 2019.

Technical Overview

The previous chart also exposes the cross advancing in a mid-term uptrend drawn in blue, which remains active since last March 18th, when the price found support at 59.490. Likewise, we distinguish an accelerated short-term bullish trend plotted in green, which began in early November. 

The 2.774 reading observed in the EMA(60) to Close Index leads us to suspect that the impulsive bull market developed in the NZDJPY cross seems to be in an exhaustion stage. Therefore, the cross is likely to develop a reversal movement in the following trading sessions.  

Nevertheless, before taking a position on the bearish side, the price action must confirm the reversal movement. 

Technical Outlook

The following 12-hour chart presents the mid-term Elliott Wave view or the NZDJPY cross. The drawings reveal the cross advancing in an incomplete fifth wave of Minuette degree, labeled in blue that belongs to the fifth wave of Minute degree, in black.

NZDJPY’s price movements reveal an impulsive five-wave sequence of Minute degree identified in black, which began last March 18th, when the cross found fresh sellers after the massive sell-off developed in the global stock market. 

Likewise, once the extended third wave (in black) ended, the cross developed a sideways movement as a flat pattern, which found fresh buyers at 68.633. In this context, considering the Elliott Wave theory and that wave ((iii)) was the extended wave, the next impulsive wave ((v)) (in black) can’t be extended and should look similar to wave ((i)), also in black. 

On the other hand, watching the fifth wave’s internal structure (in black), the wave (ii) (in blue) looks like a complex correction, and the third wave is the extended movement. In this context, the current wave (v) (in blue), which is still in development, shouldn’t be an extended rally.

Consequently, the cross could complete its fifth wave of Minute degree in the area defined by the psychological levels between 74.00 and 75.00. Finally, until the cross shows evidence of a reversal, such as a bearish engulfing candle, we should consider the cross’ trend as bullish.

Categories
Crypto Market Analysis

Daily Crypto Review, Dec 2 – Traders Sell the News on ETH 2.0 Phase 0 Launch; Crypto Market in the Red

The cryptocurrency sector has dipped as the market entered a “selloff” mode the moment Ethereum’s 2.0 Phase 0 launched. The largest cryptocurrency by market cap is currently trading for $18,843, representing a decrease of 3.83% on the day. Meanwhile, Ethereum lost 2.83% on the day, while XRP managed to lost 6.17%.

 Daily Crypto Sector Heat Map

SushiSwap gained 34.83% in the past 24 hours, making it the most prominent daily gainer in the top100. It is closely followed by Kusama’s gain of 10.74% and Ampleforth’s 9.05% gain. On the other hand, HedgeTrade lost 10.21%, making it the most prominent daily loser. It is followed by Horizen’s loss of 9.44% and Ethereum Classic’s loss of 8.77%.

Top 10 24-hour Performers (Click to enlarge)

Bottom 10 24-hour Performers (Click to enlarge)

Bitcoin’s market dominance has decreased slightly since we last reported, with its value currently staying at 62.3%. This value represents a 0.1% difference to the downside when compared to yesterday’s value.

Daily Crypto Market Cap Chart

The crypto sector capitalization has decreased significantly in the past 24 hours. Its current value is $560.78 billion, representing a $17.09 billion increase compared to our previous report.

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What happened in the past 24 hours?

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Technical analysis

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Bitcoin

Bitcoin has spent the day pulling back from its all-time highs and towards the $18,500 level. Its price formed a triangle formation on the 30-minute time-frame right after the price dump (which happened at the exact moment ETH 2.0 Phase 0 launched, as people were selling the news) and then broke it to the downside. Its price is now fighting for the $18,790 level (78.6% Fib retracement).

Bitcoin is quite volatile and unpredictable at the moment, but short trades in either direction could be viable. Traders should pay attention to volume and watch smaller time-frames and catch formations to trade off of them.

BTC/USD 30-minute chart

Bitcoin’s technicals on all time-frames are slightly tilted towards the buy-side. However, they show slight neutrality signs, except for the monthly overview, which is completely bullish.

BTC/USD 1-day Technicals

Technical factors (4-hour Chart):
  • Price is far above its 50-period EMA and at its 21-period EMA
  • Price is at its middle Bollinger band
  • RSI is near the overbought territory (52.95)
  • Volume is average
Key levels to the upside          Key levels to the downside

1: $19,000                                 1: $18,790

2: $19,500                                 2: $18,500

3: $19,666                                  3: $18,240

Ethereum

Ethereum has, just like Bitcoin, pulled back as traders sold the news of ETH 2.0 Phase 0 launching. While its move wasn’t as pronounced, the second-largest cryptocurrency by market cap did lose quite a bit of value, as well as most likely confirmed its position below $600. The double top formation was confirmed, which added to the decisiveness of the drop.

Ethereum traders should pay close attention to Bitcoin’s movement, as it currently dictates the market direction regardless of what news moves the market (news on Bitcoin or any other altcoin).

ETH/USD 4-hour Chart

Ethereum’s daily and monthly technicals are completely bullish and show no signs of neutrality. However, its 4-hour and weekly time-frames’ sentiment is bullish but shows some neutrality.

ETH/USD 1-day Technicals

Technical Factors (4-hour Chart):
  • The price is far above its 50-period and at its 21-period EMA
  • Price is at its middle Bollinger band
  • RSI is near being overbought (55.86)
  • Volume is average
Key levels to the upside          Key levels to the downside

1: $600                                     1: $510

2: $630                                     2: $500 

3: $735                                      3: $490

Ripple

The fourth-largest cryptocurrency by market cap had a pretty slow day, with its price hovering slightly above the $0.6 mark. Its price did feel the push towards the downside that the whole crypto sector experienced, but to a much lesser extent. XRP has found support at its 4-hour 50-period moving average, above which it is currently trading.

Trading XRP is almost certainly an inferior option to trading Bitcoin and Ethereum at the moment, as both the volume and volatility are low.

XRP/USD 4-hour Chart

XRP’s daily and monthly technicals are completely bullish and show no signs of neutrality. However, its 4-hour and weekly time-frames’ sentiment is bullish but shows some neutrality.

XRP/USD 1-day Technicals

Technical factors (4-hour Chart):
  • The price is slightly above its 50-period EMA and slightly below its 21-period EMA
  • Price is slightly below its middle Bollinger band
  • RSI is neutral (49.86)
  • Volume is below average
Key levels to the upside          Key levels to the downside

1: $0.666                                   1: $0.625

2: $0.78                                     2: $0.596

3: $0.79                                   3: $0.535

 

Categories
Forex Market Analysis

Daily F.X. Analysis, December 02 – Top Trade Setups In Forex – Advance NFP in Focus!

On Wednesday, the eyes will remain on the Fed Chair Powell Testifies, ADP Non-Farm Employment Change and Unemployment Rate from the Eurozone. A primary focus will remain on the ADP Non-Farm Employment Change as this will help investors determine the odds of actual NFP data, which is due on Friday.

Economic Events to Watch Today  

 


EUR/USD – Daily Analysis

The EUR/USD closed at 1.20715 after placing a high of 1.20764 and a low of 1.19243. The EUR/USD surged above 1.2000 level and reached 1.20764 level, the highest level since May 2018 amid the optimism surrounding the coronavirus vaccine and broad-based U.S. dollar weakness.

Many factors were involved in the breakout of the EUR/USD pair on Tuesday above the 1.2000 level, including the latest optimism because of vaccine hopes, monetary stimulus from both sides, and the political certainty for a change. 

Pfizer and BioNtech were the first to report a high efficacy of 95% in a phase-3 coronavirus immunization trial on November 09. After that, many drug companies, including Moderna, AstraZeneca, Novavax, and Oxford University, also followed them. Pfizer and Moderna have already applied for emergency use authorization from the US FDA, and soon after getting the approval, these vaccines will be available for usage. Even Pfizer has sent its first mass shipment of vaccine to Chicago on Monday. All this vaccine optimism pushed the safe-haven U.S. dollar down and raised the risk sentiment in the market that supported the upward momentum of the EUR/USD pair on Tuesday.

On the stimulus front, the European Central Bank and the U.S. Federal Reserve were set to expand their bond-buying schemes. Since the pandemic has started, the stimulus aid from ECB has supported the Eurozone’s economy by allowing governments to spend more. In the United States, the Federal Reserve’s dollar printing triggered a broad risk-on mood that also helped the riskier assets like EUR/USD pair to rise. 

On the Political certainty front, the U.S. elections have declared a final winner- Joe Biden. While outgoing President Donald Trump has been continuously crying foul, his attempts to overturn the elections failed, and investors continued to price the Joe Biden victory and selling the U.S. dollar. Moreover, the nomination of Janet Yellen as Treasury Secretary was also reassuring.

On the E.U. front, the political development in the upcoming Brexit deal has entered a tunnel as an intense final round of talks is in progress, and the results of talks are yet to be declared. All these factors combined and supported the EUR/USD pair’s upward momentum on Tuesday.

On the data front, at 13:15 GMT, the Spanish manufacturing PMI for November declined to 49.8 against the forecasted 50.8 and weighed on Euro. At 13:45 GMT, the Italian Manufacturing PMI also dropped to 51.5 against the projected 52.0 and weighed on the single currency. At 13:50 GMT, the French Final Manufacturing PMI raised to 49.6 from the expected 49.1 and supported Euro. AT 13:55 GMT, the German Final Manufacturing PMI stayed the same at 57.8. The German Unemployment Change came in as -39K against the expected 9K and supported the single currency. At 14:00 GMT, the Final Manufacturing PMI from the Eurozone remained flat with the expected 53.8. At 15:00 GMT, the CPI Flash Estimate for the year dropped to -0.3% against the estimated -0.2% and weighed n Euro. The Core CPI Flash Estimate for the year came in line as expected 0.2%. 

On the U.S. front, at 20:00 GMT, the ISM Manufacturing PMI for November fell to 5.75 against the forecasted 5.9 and weighed on the U.S. dollar and supported the upward momentum of the EUR/USD pair. The Construction Spending for October surged to 1.3% against the estimated 0.8% and supported the U.S. dollar. The ISM Manufacturing Prices for November also surged to 65.4 against the forecasted 65.0 and helped the U.S. dollar. The Wards Total Vehicle Sales from the U.S. declined to 15.6M against the estimated 16.1M and weighed on the U.S. dollar that added further gains in EUR/USD pair.

Given the above manufacturing data, the Eurozone economy’s outlook looks somewhat better than the United States outlook that added extra pressure on the U.S. dollar and helped the EUR/USD pair to place highs above the 1.200 level on Tuesday.

Daily Technical Levels

Support   Resistance

1.1971       1.2122

1.1873       1.2175

1.1819       1.12273

Pivot point: 1.2024

EUR/USD– Trading Tip

The EUR/USD surged dramatically on the back of risk-on sentiment amid positive reports over the COVID19 vaccine, which dragged the pair higher above the 1.2074 level. On the higher side, the violation of the 1.2010 resistance level is now working as a support, and it can lead the pair further higher until 1..2160. The bullish bias remains dominant today, especially over the 1.2015 level. However, the EUR/USD pair has recently formed a tweezers top pattern around 1.2076, suggesting the odds of bearish retracement. In this case, the EUR/USD can also drop until the support level of 1.2017 that marks 23.6% Fibonacci retracement. Let’s keep an eye on the 1.2060 support level today. 


GBP/USD – Daily Analysis

The GBP/USD closed at 1.34224 after placing a high of 1.34424 and a low of 1.33149. After placing losses for three consecutive days, the GBP/USD pair rose on Tuesday and recorded gains on the back of broad-based U.S. dollar weakness and increased Brexit hopes. The GBP/USD pair hit the highs at 1.3400 level on Tuesday over the positive Brexit news after the Times Radio’s Chief Political Commentator Tom Newton Dunn tweeted the U.K. and E.U. trade deal talks have entered a mythical tunnel. Though either side formally confirmed or rejected the “tunnel” status of negotiations after his tweet. 

The tunnel refers to a state of intense negotiation that essentially ends up having some agreement between both parties, and before that, neither side leaves. Though it does not guarantee a deal will be made, it shows a strong willingness/commitment from both sides to work as hard as possible to get a compromise. After this tweet by Dunn, the GBP/USD pair started to gain traction and rise in the financial market due to increased demand for British Pound. 

On the other hand, the GBP/USD pair’s gains could also be attributed to the U.S. dollar’s weakness. The greenback was weak across the board after the release of poor macroeconomic data and the rising number of coronavirus cases in the U.S.

The top U.S. health officials announced plans on Tuesday to begin vaccinating Americans against the coronavirus as early as mid-December amid the increasing death from coronavirus. The nationwide deaths hit the highest number for a single day in six months in the U.S. and raised economic recovery fears that led to the U.S. dollar’s weakness and improved GBP/USD pair.

On the data front, at 20:00 GMT, the ISM Manufacturing PMI for November declined to 5.75 against the estimated 5.9 and weighed on the U.S. dollar and supported the bullish momentum of the GBP/USD pair. For October, the Construction Spending rose to 1.3% against the projected 0.8% and helped the U.S. dollar. The ISM Manufacturing Prices for November also raised to 65.4 against the estimated 65.0 and supported the U.S. dollar. The Wards Total Vehicle Sales from the U.S. fell to 15.6M against the anticipated 16.1M and weighed on the U.S. dollar that added further gains in GBP/USD pair.

On Britain front, at 12:00 GMT, the Nationwide HPI for November raised to 0.9% against the forecasted 0.2% and supported the British Pound that added further gains in GBP/USD pair on Tuesday. At 14:30 GMT, the Final Manufacturing PMI also raised to 55.6 against the expected 55.2 and supported the British Pound that added further gains in GBP/USD pair.

Daily Technical Levels

Support   Resistance

1.3316       1.3342

1.3301       1.3353

1.3290       1.3368

Pivot point: 1.3327

GBP/USD– Trading Tip

The GBP/USD is trading sideways, having violated the narrow trading range of 1.3397 – 1.3304. The market is expected to display choppy sessions with a new limited range of 1.3397 to 1.3452 level. The violation of a triple top resistance level of 1.3397 level is now working as a support, and it may trigger a bounce off in the Cable until 1.3452 and 1.3512 level. Let’s keep an eye on the 1.3397 level to stay bullish above this level today. 


USD/JPY – Daily Analysis

The USD/JPY pair was closed at 104.305 after placing a high of 104.576 and a low of 104.180. The USD/JPY pair stayed on a bullish track on Tuesday despite the broad-based U.S. dollar weakness due to increased risk flow in the market. The stock markets have been buoyed by the news that the first coronavirus vaccine could be administered by the end of the year. Despite the acceleration of the pandemic in the U.S. and many other parts of the world, the riskier assets gained on the back of improved risk sentiment due to vaccine hopes. The U.S. Dollar Index (DXY) that measures the U.S. dollar value against the six currencies basket fell to 92 levels on Tuesday.

The pair rose above 104.5 level on Tuesday amid the broad-based risk sentiment in the market over the optimism surrounding the vaccine hopes. However, the gains in USD.JPY pair started to fade away in the late trading session after the US ISM Manufacturing PMI release for November. In November, the declining manufacturing activity was the proof of halted manufacturing activity due to the rising number of restrictive measures in many states of America due to escalated second wave of coronavirus.

At 04:30 GMT, the Unemployment Rate from Japan for October remained flat with the expectations of 3.1%. At 04:50 GMT, the Capital Spending for the quarter from Japan came in as -10.6% against the expected -12.0% and supported the Japanese Yen that limited the USD/JPY pair’s gains. AT 05:30 GMT, the Final Manufacturing PMI from Japan also raised to 49.0 against the expected 48.3 and supported the Japanese Yen that capped further gains in the USD/JPY pair.

On the U.S. dollar front, at 20:00 GMT, the ISM Manufacturing PMI for November fell to 5.75 against the projected 5.9 and weighed on the U.S. dollar that capped further gains in the USD/JPY pair. For October, the Construction Spending surged to 1.3% against the estimated 0.8% and supported the U.S. dollar and added gains in the USD/JPY pair. The ISM Manufacturing Prices for November also rose to 65.4 against the expected 65.0 and helped the U.S. dollar that added additional gains in the USD/JPY pair. The Wards Total Vehicle Sales from the U.S. dropped to 15.6M against the expected 16.1M and weighed on the U.S. dollar that capped further gains in the USD/JPY pair.

Meanwhile, the U.S. death rate because of the COVID-19 virus has also increased to an alarming level as it posted the highest number for a single day in six months. The Top U.S. health official announced plans on Tuesday to begin vaccinating Americans against the coronavirus as early as mid-December. This statement also raised the risk sentiment and added weight on the Japanese Yen that supported the USD/JPY pair’s upward momentum on Tuesday.

Furthermore, On Tuesday, Federal Reserve Chairman Jerome Powell said that the United States economy’s outlook was extraordinarily uncertain due to increased numbers of coronavirus cases that have affected the U.S. economy hardly. 

In his testimony to the U.S. Senate Committee on Banking, Housing and Urban Affairs, Powell said that the increasing number of COVID-19 cases in the U.S. and abroad were concerning. He said that until the people were confident about re-engaging the economic activities confidently, full economic recovery was impossible. At the same time, Powell was upbeat over the recent optimistic news on vaccine development worldwide.

Meanwhile, several programs set by the Federal Reserve in March are near to end of the year. In response to this, Powell stated that these programs would help unlock almost $2 trillion funding. After this report, the USD/JPY pair started losing its early daily gains as the greenback became weak across the board due to rising hopes for stimulus measure.

Furthermore, On Tuesday, the outgoing Treasury Secretary Steven Mnuchin also testified before the Senate and urged lawmakers to pass a second stimulus bill quickly. This also added in the U.S. dollar weakness and capped further gains in the USD/JPY pair on Tuesday.

Daily Technical Levels

Support   Resistance

104.03       104.16

103.97       104.23

103.91       104.29

Pivot point: 104.10

USD/JPY – Trading Tips

The USD/JPY is trading with a sideways trading range of 104.600 – 104.200, holding below an immediate resistance level of 104.600. On the lower side, the safe-haven currency pair may find support at the 103.719 level. The pair seems to disrupt the resistance level of 104.600, and if this happens, the USD/JPY may soar until the next resistance area of 105.030 level. The MACD and RSI support the buying trend, but we should only take buying positions over the 104.600 level today. Good luck!

Categories
Cryptocurrencies

Bitcoin is Booming, But Which are the Best Altcoins to Own?

In the midst of the current Bitcoin bull run, it is difficult just to look any other way. After all, it is this pioneer crypto that has been hitting the headlines for weeks now. Both speculators and analysts have said the rally will continue. Also, there’s a likelihood that BTC will surpass the $20,000 mark, judging by recent performance and investor sentiment. In short, all our eyes have been glued to BTC, which has delivered a spectacular show hitherto. But, remember, investors must diversify. 

 Some spectators wonder whether it is still viable to jump in, naysayers are waiting for the crash, and risk-takers are diving deeper into the frenzy and multiplying their investments by the minute. Whichever your case, there are alternatives worth considering. 

Today, we take a look at some of the most promising altcoins, at least the ones you can bet your dollars on in the coming months. 

#1: Monero (XMR)

The rate at which Monero is rising is monumental – well, not price-wise, yet – but in terms of interest. Year-to-date 24-hour trading volume has increased by 20 times. The interest investors, regulators, and other stakeholders expressed in Monero in 2020 confirm that good tidings are in the offing. 

While Monero prices have not grown monumentally, they have still grown anyway. At some point in March, the coin was exchanging at $37. However, on pulling up its socks, it rose steadily beginning April to its current $130, a 400% gain. Let’s just say this is a modest gain given that the crypto has much more potential. 

Also worth mentioning is that Monero also recently reached $139, its 2-year high. Combining this with the fact that the crypto has become the center of attention among regulators, we are likely to see even higher volumes, which will boost speculation and eventually impact prices. 

Of course, things could go wrong and cause the crypto to crash, particularly if the Department of Internal Revenue succeeds in cracking its privacy – something they have been pursuing. Until then, XMR is one altcoin you cannot afford to lose sight of.

#2: Ripple (XRP)

Ripple has had an advantage over other altcoins since its inception, and that is because it was designed for real-time payment settlement. Essentially, Ripple is a platform that financial institutions can use to send money across borders with the following major advantages:

  • Lower costs than the traditional SWIFT system
  • Faster (real-time) settlements, compared to the traditional system that takes several business days.
  • Has all the security mechanisms of blockchain technology 

This background tells us that Ripple is a solid project, and we know solid projects have the growth potential – there’s no guarantee, but there’s hope.

Hope aside, Ripple’s native currency XRP has been performing modestly for the better part of 2020, trading between the $.013 – $0.69 range. If you compare it with Bitcoin’s performance, you’re likely to undermine Ripple’s year-to-date growth. But think again – since the 2017 crypto bubble, XRP has never reached the heights we see now. To be fair, surpassing the 2-year high is a milestone that signifies that this cryptocurrency is rising. 

You can choose to wait and see how things turn out, but it’s best to keep close tabs on XRP. 

#3: Fusion (FSN)

Fusion is one of the most underrated cryptocurrencies. Although investors are yet to see Fusion’s potential, there is an indication that this crypto will grow. 

Fusion’s potential lies in the adoption of DeFi, which is already on the rise. The crypto’s developers are working on several innovations that are set to transform DeFi. One of the most notable is the WeDeFi project that seeks to bring DeFi to the common person.

Fusion provides investors with different and exciting investment options. For instance, the crypto supports passive staking, which is only available in proof-of-stake crypto networks. With this investment option, you delegate your savings for verifying transactions. In proof of work networks, those with more tokens have higher staking power. Leaving aside the intricacies, Fusion can enable investors to earn by basically doing nothing. 

At the moment, the crypto is undervalued. It ranks at around 460 by market capitalization. This valuation will certainly change, especially as DeFi picks up pace. Meanwhile, you can invest in Fusion now while the prices are still low ($0.26) at the time of writing. When daily trading volumes increase as a result of DeFi’s mass adoption, consider this opportunity gone. 

#4: Ethereum (ETH)

Historically, Ethereum has been Bitcoin’s most fierce competitor. Best known as the king of smart contracts and decentralized apps, Ethereum has worked its way up to become the second-largest cryptocurrency by market capitalization. 

Ethereum’s tech and investment potential is its backbone. Developers have used the crypto’s facilities to build a wide range of applications, all of which add value to the network. However, it is the upcoming launch of Ethereum 2.0 that we should set our eyes on. 

On December 1 at noon, Ethereum will change from proof of work to proof of stake (no more mining). First, whenever cryptos undergo significant changes, a frenzy is created, and prices surge as investors scramble to be part of the revolution. Secondly, the staking system will encourage investors to lock their funds in the network to earn returns from verifying transactions. Since a higher stake gives one more power, investors are likely to lock more ETH to the network. The result? An inevitable shortage and a consequent price surge.

Unless something goes wrong, ETH will keep rising further in the coming months. 

#5: Litecoin (LTC)

Litecoin is among the oldest altcoins. It was created shortly after Bitcoin as a lite version of the pioneer crypto. As such, it is very similar to Bitcoin. The main difference between the two is that Litecoin is less resource-intensive, and this trickles down to users as faster and cheaper transactions. 

Like BTC and other major cryptos, Litecoin has shown stable upward growth in 2020, especially from April onwards. In November, it reached $86, its highest in the year. The crypto’s performance seems to be following Bitcoin’s performance, albeit not so closely. Even so, since the trend is upward, it is a sensible alternative at the moment.

There you go, folks! Take some time to monitor each of these from close quarters to find out which one works best for you.

Final Thoughts

While Bitcoin is currently grabbing headlines for its stellar performance, it is not the only cryptocurrency worth investing in. Monero, Ripple, Fusion, Ethereum, and Litecoin are equally savvy alternatives. These altcoins have a good track record, have solid projects behind them, and are currently performing well. Whether you’re looking for short-term or long-term investments, you now know which are the best altcoins to own.

Categories
Forex Elliott Wave Forex Market Analysis

EURJPY Advances Toward Key Supply Zone

In our latest EURJPY analysis, we commented on its advance in an incomplete corrective structure identified as a triangle pattern, which remains in development since mid-2014.

Technical Overview

Also, we saw that the mid-term trend looks like an incomplete corrective structure, which seems to advance in a wave B of Minor degree, labeled in green. Moreover, the structure observed previously unveiled the progress in an incomplete wave ((b)), identified in black, which should develop a bounce toward the supply zone between 125.285 and 126.123.

The price action is currently seen advancing in its wave (c) of Minuette degree, labeled in blue, which has now reached the supply zone between 125.285 and 126.123 forecasted in our previous analysis.

On the other hand, the current wave (c), in blue, that remains in development could extend its gains toward the psychological barrier of 126, where the cross could start to decline to the wave ((c)), in black. This bearish sequence, possibly developed with five internal segments, should complete the wave B of Minor degree, in green.

Short- term Technical Outlook

The EURJPY in its 2-hour chart reveals the internal structure created by the wave (c), in blue, which shows the intraday ascending channel plotted in green. The price action that has surpassed the ascending channel’s upper line suggests the rise of the third wave of Subminuette degree labeled in green that is in progress.

In this context, according to the Elliott Wave theory, once the EURJPY completes the advance of the third wave, in green, the cross should experience a limited decline corresponding to the fourth wave in green. This drop could reach the demand zone between 124.931 and 125.128, where the price could find fresh buyers expecting the price to head toward new highs.

The fifth wave’s potential target zone, in green, is located between 125.939 and 126.497. In this area, the cross could complete the wave ((b)) of Minute degree in black. 

Finally, the invalidation level of this intraday bullish scenario is found at 124.566, which corresponds to the top of the first wave of Minute degree.

Categories
Forex Fundamental Analysis

Everything About ‘Economy Watchers Current Index’ Economic Indicator

Introduction

It has long been posited that in any economy, the first people to experience growth or contraction are those who provide basic-everyday services to the households. These service providers are considered to be “in touch” with the realities of the economy since they directly interact with their customers. While most people do not pay close attention to this index, its fluctuations could provide valuable insights into the economy.

Understanding Economy Watchers Current Index

For this analysis, we will focus on the Japanese Economy Watchers Current Index. This index attempts to measure the present economic conditions in Japan, especially from the perspective of households. From its name ‘economy watchers,’ it directly measures the mood of businesses who are in constant touch with the final consumers.

The index is compiled by surveying about 2050 employees in every sector of the economy. Here is the list of the sectors surveyed in the economy.

  • In household activity related sectors
    • Retail establishments like supermarkets and automobile sellers
    • Food and beverage establishments like restaurants
    • Services to households such as transportation, telecommunication, and leisure facility operators
    • Housing services
  • Corporate activity related sectors, including:
    • Operators in the manufacturing sectors
    • Employees and operators in the nonmanufacturing sector
    • Employees in the primary sectors like agriculture, mining, and fishing
  • Employee-related sectors such as;
    • Temporary labour placement agents
    • Job magazine editors
    • Staffing agencies
    • Professionals who understand labour market trends

In all the above sectors, the data is compiled as per the regions in which it was collected. It is to say that the survey is divided based on the area being surveyed in japan. It covers the 11 regions in Japan.

The people who are surveyed are well-placed in positions that enable them to observe first-hand the changes in economic activities. These are the questions that the survey asks.

  • How they assess the current economic conditions and detailed reasons for their answer
  • Their assessment of future economic conditions and their reasons for this assessment

The survey is conducted monthly from the 25th to the end of that month. Note that the Japanese Cabinet Office selects regional research organisations to administer these surveys. Based on the responses obtained, a ‘diffusion index’ is compiled. This diffusion index is then converted into a percentage to give the Japanese Economy Watchers Current Index. Here’s how the responses are weighted in the diffusion index.

  • Better is +1
  • Slightly better is +0.75
  • Unchanged is +0.5
  • Slightly worse is +0.25
  • Worse is 0

Using Economy Watchers Current Index in Analysis

Any value above 50 indicates that respondents are optimistic about the future, while values below 50 show that they are pessimistic. Now, note that a rise in the Economy Watchers Current Index doesn’t mean that all sectors of the economy are optimistic. It just means that majority of the sectors in the economy are optimistic.

For example, economy watchers in every other sector might be optimistic, but those in the nonmanufacturing sectors are pessimistic. This scenario means that majority of economy watchers are optimistic. Similarly, when the Economy Watchers Current Index shows pessimism about the economy, it doesn’t mean that every sector in the economy shows pessimism. Some economy watchers could be optimistic.

When the economy watchers are optimistic about the future, it means that they expect the economy to grow. Remember that these economy watchers are sampled from virtually every sector of the economy in every region of Japan. For example, let’s say that economy watchers in the manufacturing sector are optimistic about the economy.

This means that they expect the manufacturing sector to expand, which means that the output from the sector will increase. Going back to the basic knowledge of the economy, we know that suppliers and producers take their cue from consumers. Therefore, an increase in production in the manufacturing sector, or any other sector, means that consumer demand has also increased.

Let’s think of the factors that drive an increase in consumer demand. The primary factor is the increase in money supply in the economy, which is driven by easy access to cheap finance or an increase in the employment rate. Here, consumers have increased disposable income, which means that the economy is expanding.

Conversely, when the Economic Watchers Current Index is decreasing and showing increased pessimism, it could mean that the economy is contracting. Let’s use the example of household activity related sectors. When they are pessimistic, it means that they are experiencing a shortfall in demand for their goods and services. Since we have established that household demand drives these sectors, a decrease in demand could mean that households are cutting back on their expenditures.

This reduction in consumption is a direct consequence of lower disposable income in the economy. When households have reduced disposable income, they will prioritise expenditure on only the most essential goods and services. It means that consumer discretionary industries will take a hit, as will the overall economy – GDP will fall as the economy contracts.

Observe in the graphs below that the fall in the Japanese Economy Watchers Current Index corresponds to the drop in Japanese GDP in Q1 2020.

Source: Trading Economics

Source: St. Louis FRED

Impact of the Japanese Economy Watchers Current Index on the JPY

We have seen that the Economy Watchers Current Index can directly be linked to the money supply in the economy.; which means it can also be used as a leading indicator of inflation.

When the Economy Watchers Current Index is continually rising, it can be taken as a sign that there is increasingly more money supply in the economy. In this case, governments and central banks might step in to implement contractionary policies like hiking interest rates. In the forex market, this will increase the value of JPY. Conversely, when the Economy Watchers Current Index steadily drops, it might trigger expansionary policies, which will make the JPY depreciate.

Data Sources

The Cabinet Office of Japan is responsible for the survey and publication of the Japanese Economy Watchers Current Index. In-depth and historical data is also available at Trading Economics.

How the Japanese Economy Watchers Current Index Affects The Forex Price Charts

The recent publication from the Cabinet Office of Japan was on October 8, 2020, at 2.00 PM JST. The release is available at Investing.com. The publication of the Japanese Economy Watchers Current Index is expected to have a low impact on the JPY.

In September 2020, the Japanese Economy Watchers Current Index was 49.3 compared to 43.9 in August 2020.

Let’s find out how this release impacted the JPY.

AUD/JPY: Before Japanese Economy Watchers Current Index Release on 
October 8, 2020, just before 2.00 PM JST

The AUD/JPY pair was trading in a weak uptrend before the publications of the Japanese Economy Watchers Current Index. The 20-period MA was merely slightly rising with candles forming just above it.

AUD/JPY: After Japanese Economy Watchers Current Index Release on 
October 8, 2020, at 2.00 PM JST

The pair formed a 5-minute “Doji” candles immediately after the publications of the index. Since the index showed pessimism in the Japanese economy, the JPY is expected to be weaker compared to the AUD. As expected, the pair subsequently traded in a renewed uptrend with the 20-period MA steeply rising and candles forming further above it.

Bottom Line

The article has shown the importance of the Economy Watchers Current Index in the Japanese economy. More so, the significance of the index has been evidenced by the price chart analysis. Note that although the index is usually a low-impact indicator. However, its significance is observed in the current coronavirus pandemic since it can be used as a leading indicator of economic recovery.

Categories
Forex Elliott Wave Forex Market Analysis

Is AUDUSD Turning Bearish?

In our previous technical analysis of the AUDUSD pair, we mentioned the potential corrective formation that was developing. In particular, we warned about the progress of an incomplete fourth wave of Minute degree identified in black, in which the pair was advancing on the wave (b) of Minutette degree in blue.

Technical Overview

As the previous chart shows, the price action seems moving in a mid-term sideways channel. This formation has been evolving since early September, when the price topped at 0.74134. In terms of the Elliott Wave theory, the figure shows the progression of a likely incomplete flat pattern (3-3-5).

In this context, the bearish rejection below September’s high of 0.74134 should confirm the end of wave (b), in blue, and the beginning of wave (c). Also, according to Elliott’s textbook, the coming wave (c) should follow an internal sequence subdivided into five waves.

The big picture of the AUDUSD pair currently reveals the gray box’s rejection suggested in our previous analysis. From here, the Aussie could start to decline in a five-wave sequence corresponding to the already mentioned wave (c) of Minuette degree, labeled in blue. 

Moreover, after wave (c) completes, the Australian currency should also end its wave ((iv)) of Minute degree in black and giving way to a new impulsive wave corresponding to the fifth wave of the same degree.

Short-term Technical Outlook

The AUDUSD price exposed in the next 2-hour chart reveals the completion of wave c of Subminuette degree identified in green, which topped at 0.74076 on November 30th, as the price action developed an ending diagonal pattern.

Once the price touched the psychological barrier of 0.74, the price began to decline, developing a breakdown below the baseline of the ending diagonal pattern, piercing the demand zone between 0.73492 and 1.73571, where the Aussie started a consolidation in the current trading session.

Considering that the pair started to consolidate, we expect an intraday sideways formation, likely a flag pattern. In this context, if the price breaks and closes below the baseline of this flag pattern, the AUDUSD could confirm the bearish continuation, which could make it drop to the next demand zone between 0.72654 and 0.72801.

Likewise, the price could extend its declines toward the next demand zone between 0.71449 and 0.71651. The movement, developed into a five-wave sequence, should complete the wave (c) of Minuette degree identified in blue, which, at the same time, could confirm the end of wave ((iv)) of Minute degree labeled in black, as we said earlier.

The invalidation level corresponding to this downward scenario is placed at the high of wave c, in green,  0.74076.