Friday, 18 August 2017

Euro edges higher as dollar outlook darkens

LONDON (Reuters) - The euro on Thursday rose towards 2 1/2-year highs against the dollar seen earlier this month on bets that euro zone officials will embark on a gradual unwinding of their massive policy stimulus while U.S. policymakers looked increasingly wary.

The minutes of the Federal Reserve's July 25-26 meeting showed some members called for halting interest rate hikes until it was clear a softening inflation trend was transitory, but it also indicated the Fed was poised to begin reducing its $4.2 trillion portfolio of bonds.

Even though the euro stumbled on Wednesday after sources signalled European Central Bank chief Mario Draghi would not use his Jackson Hole appearance to signal policy change by the bank, investors remain bullish about the currency's outlook.

"Most investors are still relatively underinvested in the euro and that unwinding is still going on while structural factors such as the current account surplus for the euro zone is a strong support for the currency," said James Binny, EMEA head of currency, State Street Global Advisors based in London.

The single currency was trading slightly higher at $1.1763 in early trades, nearing a 2-1/2 year high of $1.1910 hit earlier this month.

The euro has gained 12 percent so far this year against the dollar and is the best performing currency in the G10 FX space with most of its gains coming in recent months on growing bets that the ECB will start unwinding its massive policy stimulus.

The U.S. dollar was also undermined by worries over U.S. President Donald Trump's ability to implement his economic policies after he disbanded two high-profile business advisory councils.

The dollar's index against a basket of six major currencies slipped to 93.50 from Wednesday's three-week high of 94.145.

Reference: Saikat Chatterjee

Thursday, 17 August 2017

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Dollar on defensive after Fed minutes dampen rate hike prospects

TOKYO (Reuters) - The U.S. dollar was on the defensive on Thursday after the minutes from the Federal Reserve's last policy meeting showed policymakers were increasingly wary of recent softness in inflation and could delay a rate hike.

The readout of the July 25-26 meeting showed some members called for halting interest rate hikes until it was clear the inflation trend was transitory, but it also indicated the Fed was poised to begin reducing its $4.2 trillion portfolio of bonds.

The dollar also stepped back to 109.84 yen, down 0.3 percent from late U.S. trade and down more than a full yen from Wednesday's high of 110.95.

The dollar's index against a basket of six major currencies slipped to 93.39 from Wednesday's three-week high of 94.145.

"There's no change in market expectations that the Fed will announce the start of balance sheet reduction in September. But markets think there's risk to the scenario of a rate hike in December," said Shunsuke Yamada, chief Japan FX strategist at Bank of America Merrill Lynch.

Money market futures are pricing in about a 40 percent chance the Fed will raise rates by December, compared to just under 50 percent before the Fed's minutes.

The euro gained 0.1 percent in early Asian trade to $1.1780, recovering from the previous day's low of $1.1681, its lowest level in nearly three weeks.

The common currency had dropped after Reuters reported sources saying European Central Bank President Mario Draghi will not deliver a new policy message at his planned Aug. 25 speech in the U.S. Federal Reserve's Jackson Hole conference.

The euro held firmer against sterling, fetching 91.335 pence, just under its Oct 11 high of 91.405, which is the highest level since 2009 except for a few moments during the pound's flash crash on Oct.

The euro has been strengthening against sterling since April on speculation Brexit will hurt the UK economy more than it does the euro zone.

"Buying in euro/pound was one of the easiest trades. We could see some selling at current levels but if the euro rises clearly above 91.50, we could well have talk of a rise to parity (against the pound)," said Bart Wakabayashi, Tokyo Branch Manager of State Street.

The dollar's diminishing rate hike prospects gave a big boost to other major currencies that compete with the dollar for yield attraction.

The Canadian dollar had gained more than 1 percent on Wednesday and last stood at C$1.2612 to the dollar, having hit a near two-week high of C$1.2605 earlier in the day.

The Australian dollar stood at $0.7933, maintaining Wednesday's 1.3 percent gain, its biggest daily rise in about a month.

The currency showed a subdued reaction to mixed reading on local employment data, which showed a fall in the unemployment rate led by a bounce in part-time work, but also showed a fall in full-time jobs.

The U.S. dollar was also undermined by worries over U.S. President Donald Trump's ability to implement his economic policies after he disbanded two high-profile business advisory councils.

The move came after several chief executives quit in protest over his remarks blaming weekend violence in Virginia not only on white nationalists but also on anti-racism activists who opposed them.

"I would expect more U.S. political risks in September as the debt ceiling issue will be coming up. We could see more volatilities in markets," said Merrill's Yamada.

The Congressional Budget Office has said U.S. lawmakers need to raise the debt ceiling by mid-October to avoid defaulting on debt payments.

Reference: Hideyuki Sano;

Weaker euro, stronger growth lift Europe shares

LONDON (Reuters) - European shares were on track for their best week since late April on Wednesday, gaining almost 1 percent on forecast-beating growth data, rising metals prices and a weakening euro.

U.S. stocks were also set to open some 0.2 percent higher.

Metals markets were buoyant, with the price of zinc, used to galvanise steel, hitting its highest in a decade on Chinese infrastructure demand and boosting mining company shares.

The pan-European STOXX 600 index rose 0.8 percent, led by basic resources companies , and energy firms, building further on Monday's 1.1 percent rise as European equities recovered from their worst week this year triggered by a nuclear standoff between the United States and North Korea

However, with tensions over the Korean peninsula waning, helping lift Asian shares in the past two days, investors have re-focused on fundamentals.

Data on Wednesday showed the euro zone economy expanded by more than previously forecast in the second quarter, compared with the same period last year, while annual growth in Italy was at its fastest since 2011.

Stronger economic growth is part of the reason global active funds remain overwhelmingly positive on European equities, the biggest consensus overweight position according to Barclays’ analysis of investor flows.

"The market mindset is that Europe is recovering from a very deep, very long recession that hit at its financial core," said Christopher Peel, chief investment officer at Tavistock Wealth.

The fall in the euro against the dollar would also be a boon to European companies, making their exports cheaper and potentially lifting earnings.

BlackRock, the world's biggest asset manager, warned in a note earlier this week that a stronger euro could slow the pace of earnings growth, adding that the ratio of earnings estimates upgrades to downgrades in Europe had fallen to a one-year low.

The euro is the best performing major currency versus the dollar this year - up 11.5 percent so far. However, it took a hit on Wednesday after a Reuters report that European Central Bank chief Mario Draghi would not use next week's annual gathering of central bankers in Jackson Hoel, Wyoming, to signal policy changes.

The report, citing two sources familiar with the situation, dashed expectations that Draghi would begin to chart a course out of the ECB's massive stimulus programme.

The euro fell as low as $1.1691 and was last down 0.3 percent on the day at $1.1703, some 2 percent below a 2 1/2-year peak of $1.1911 touched earlier this month.

The dollar rose 0.1 percent against a basket of currencies, holding most of Tuesday's gains chalked up on the biggest rise in U.S. retail sales in seven months.

The yen, which rose as tension over the Korean peninsula intensified last week, fell 0.1 percent to 110.78 per dollar.

Sterling rose almost half a cent after data showed UK wages rising faster than expected in the three months to June before giving up most of those gains. It last traded flat on the day at $1.2867.

The strong U.S. retail sales data slightly boosted expectations that the Federal Reserve will raise interest rates for a third time this year.

The Fed kept interest rates unchanged last month and said it expected to start winding down "relatively soon" its massive holdings of bonds, bought in an effort to boost the economy.

"Most people are looking for a final hint that the Fed will start the balance sheet normalisation process next month, and perhaps give us some clue about the next rate hike as well," said ING strategist Martin van Vliet.


Zinc rose 2.5 percent to as high as $3,037 a tonne, its highest since late 2007. Copper rose 1.3 percent to $6,464 a tonne.

"There (was) a fair level of scepticism at the start of the year when China's infrastructure projects were announced but we're seeing much better-than-expected growth in fixed asset investment," said analyst Daniel Hynes of ANZ in Sydney.

Gold fell before the Fed minutes. It last stood at $1,270 an ounce, down less than 0.1 percent.

Brent crude oil  rose 18 cents to $50.98 a barrel on a reduction in U.S. stockpiles.

Reference: Nigel Stephenson

U.S. stocks set to open higher ahead of Fed minutes

(Reuters) - U.S. stocks were set to open higher on Wednesday, with investors awaiting the Federal Reserve's latest policy meeting minutes for clues on future interest rake hikes this year.

The central bank will release the details of the July policy meeting at 1400 ET (1800 GMT), which could offer insights on the debate over the policy outlook.

Policymakers unanimously decided to keep interest rates unchanged in the July 25-26 meeting and said they planned to reduce the central bank's massive holdings of bonds "relatively soon".

"Investors are looking at expectations of rates going up, but not right away, in a measured pace," said Andre Bakhos, managing director at Janlyn Capital. "I don't believe the Fed's going to bring any shocking news to investors."

A slide in inflation readings in recent months, which remain below the Fed's 2 percent target rate, have made the markets skeptical about a rate hike by December.

However, recent hawkish comments by New York Fed chief William Dudley advocating for another rate hike this year and strong retail sales data on Tuesday have upped the odds.

Chances of a December hike rose to 49.2 percent, up from 42 percent at the start of the week, according to CME Group's FedWatch tool.

At 8:33 a.m. ET, Dow e-minis were up 50 points, or 0.23 percent, with 20,760 contracts changing hands, and S&P 500 e-minis were up 5.25 points, or 0.21 percent, with 130,516 contracts traded.

Nasdaq 100 e-minis were up 14.75 points, or 0.25 percent, on volume of 30,606 contracts.

Data showed that U.S. homebuilding unexpectedly fell in July as the construction of single- and multi-family homes declined.

The Commerce Department said housing starts declined 4.8 percent to a seasonally adjusted annual rate of 1.16 million units.

On Tuesday, U.S. stocks closed little changed as declines in Home Depot and other retailers following results offset the gains from upbeat retail sales data and easing tensions between the United States and North Korea.

Shares of Target  rose 3.74 percent in premarket trading after the company's profit and same-store sales beat estimates.

Urban Outfitters rose 19.74 percent after the apparel retailer reported quarterly profit and sales that beat estimates, leading to multiple price target raises.

Amazon edged lower after U.S. President Donald Trump tweeted the retail giant was doing "great damage" to tax paying retailers.

Bristol-Myers Squibb was down about 2 percent after its combination drug to treat previously untreated patients with a type of kidney cancer failed to meet one of the main goals of a late-stage trial.

Reporting by Sruthi Shankar

Wednesday, 16 August 2017

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The History of Forex Trading

Trading Education

The origin of Forex trading traces its history to centuries ago. Different currencies and the need to exchange them had existed since the Babylonians. They are credited with the first use of paper notes and receipts. Speculation hardly ever happened, and certainly the enormous speculative activity in the market today would have been frowned upon.

In those days, the values of goods were expressed in terms of other goods (also called as the Barter System). The obvious limitations of such a system encouraged establishing more generally accepted mediums of exchange. It was important that a common base of value could be established. In some economies, items such as teeth, feathers even stones served this purpose, but soon various metals, in particular gold and silver, established themselves as an accepted means of payment as well as a reliable storage of value. Trade was carried among people of Africa, Asia etc through this system.
Coins were initially minted from the preferred metal and in stable political regimes, the introduction of a paper form of governmental I.O.U. during the Middle Ages also gained acceptance. This type of I.O.U. was introduced more successfully through force than through persuasion and is now the basis of today's modern currencies.

Before the First World War, most Central banks supported their currencies with convertibility to gold. However, the gold exchange standard had its weaknesses of boom-bust patterns. As an economy strengthened, it would import a great deal from out of the country until it ran down its gold reserves required to support its money; as a result, the money supply would diminish, interest rates escalate and economic activity slowed to the point of recession. Ultimately, prices of commodities had hit bottom, appearing attractive to other nations, who would sprint into buying fury that injected the economy with gold until it increased its money supply, drive down interest rates and restore wealth into the economy.

For this type of gold exchange, there was not necessarily a Central Bank need for full coverage of the government's currency reserves. This did not occur very often, however when a group mind-set fostered this disastrous notion of converting back to gold in mass, panic resulted in so-called "Run on banks " The combination of a greater supply of paper money without the gold to cover led to devastating inflation and resulting political instability.

The Great Depression and the removal of the gold standard in 1931 created a serious lull in Forex market activity. From 1931 until 1973, the Forex market went through a series of changes. These changes greatly affected the global economies at the time and speculation in the Forex markets during these times was little.

In order to protect local national interests, increased foreign exchange controls were introduced to prevent market forces from punishing monetary irresponsibility.
Near the end of World War II, the Bretton Woods agreement was reached on the initiative of the USA in July 1944. The conference held in Bretton Woods, New Hampshire rejected John Maynard Keynes suggestion for a new world reserve currency in favour of a system built on the US Dollar. International institutions such as the IMF, The World Bank and GATT were created in the same period as the emerging victors of WWII searched for a way to avoid the destabilizing monetary crises leading to the war. The Bretton Woods agreement resulted in a system of fixed exchange rates that reinstated The Gold Standard partly, fixing the USD at $35.00 per ounce of Gold and fixing the other main currencies to the dollar, initially intended to be on a permanent basis.

The Bretton Woods system came under increasing pressure as national economies moved in different directions during the 1960's. A number of realignments held the system alive for a long time but eventually Bretton Woods collapsed in the early 1970's following President Nixon's suspension of the gold convertibility in August 1971. The dollar was not any longer suited as the sole international currency at a time when it was under severe pressure from increasing US budget and trade deficits.

The last few decades have seen foreign exchange trading develop into the world's largest global market. Restrictions on capital flows have been removed in most countries, leaving the market forces free to adjust foreign exchange rates according to their perceived values.

The European Economic Community introduced a new system of fixed exchange rates in 1979, the European Monetary System. The quest continued in Europe for currency stability with the 1991 signing of The Maastricht treaty. This was to not only fix exchange rates but also actually replace many of them with the Euro in 2002. London was, and remains the principal offshore market. In the 1980s, it became the key centre in the Eurodollar market when British banks began lending dollars as an alternative to pounds in order to maintain their leading position in global finance.
In Asia, the lack of sustainability of fixed foreign exchange rates has gained new relevance with the events in South East Asia in the latter part of 1997, where currency after currency was devalued against the US dollar, leaving other fixed exchange rates in particular in South America also looking very vulnerable.

While commercial companies have had to face a much more volatile currency environment in recent years, investors and financial institutions have discovered a new playground. The Forex exchange market initially worked under the central banks and the governmental institutions but later on it accommodated the various institutions, at present it also includes the dot com booms and the World Wide Web. The size of the Forex market now dwarfs any other investment market.

The foreign exchange market is the largest financial market in the world. Approximately 1.9 trillion dollars are traded daily in the foreign exchange market. It is estimated that more than USD 1,200 Billion are traded every day. It can be said easily that Forex market is a lucrative opportunity for the modern day savvy investor.

Reference: Divyansh Sharma

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Dollar holds most of gains made on upbeat U.S. retail sales data

TOKYO (Reuters) - The dollar was steady in Asian trade on Wednesday, holding onto most of its gains made after strong U.S. retail sales data kept alive the chance of another Federal Reserve interest rate hike this year.

Minutes from the Fed's July meeting will be released later on Wednesday, and will be watched for clues on the timing of rate hikes as well as whether the Fed is likely to announce a reduction in its balance sheet at its September meeting.

"I can't expect anything hawkish from the minutes," said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.

"In the end, I think the Fed will raise interest rates as early as December this year, and this is not fully priced in the market."

He said there was a still a chance for further dollar gains if market participants began to price in higher probability of a rate increase. Fed fund futures are now showing a slightly better-than-even chance for a hike this year.

The dollar index, which tracks the greenback against a basket of six major rival currencies, was flat on the day at 93.835, well above its 15-month low of 92.548 plumbed earlier this month.

Easing fears of armed conflict between the United States and North Korea also prompted investors to buy back riskier assets they had sold last week as fiery rhetoric between the two countries escalated.

On Tuesday, state media said North Korean leader Kim Jong Un has postponed a missile strike toward the U.S. territory of Guam, which prompted investors to pare holdings of perceived safe-haven assets such as the yen, the Swiss franc and U.S. Treasuries.

Higher U.S. yields bolstered the dollar. The yield on the benchmark 10-year U.S. Treasury note rose to 2.267 percent in Asia from its U.S. close of 2.266 percent on Tuesday and 2.218 percent on Monday.

The dollar was slightly lower against its Japanese counterpart at 110.65 yen, but was well above a four-month low of 108.72 touched on Friday after disappointingly cool consumer inflation data.

"It seems that the tension on the Korean peninsula is easing, and the short-covering of the dollar-yen is happening, fuelled by the better-than-expected U.S. data," Yamamoto said.

U.S. retail sales jumped 0.6 percent in July, handily beating economists' estimate of a 0.4 percent reading, to post their biggest gain in seven months as consumers bought more cars and increased discretionary spending.

An unexpectedly strong rise in an index on manufacturing activity in New York state from the New York Federal Reserve also cheered dollar bulls. The index rose to 25.2 points in August, its highest level since September 2014.

The euro was steady at $1.1740, after falling as low as $1.1687 overnight, its lowest since late last month.

"Some people think the euro may be the best option over the dollar, but I'm sceptical of that," said Masashi Murata, senior currency strategist at Brown Brothers Harriman.

The eurozone economy has strengthened, partly due to a relatively weak euro, so eventually the European Central Bank will grow uncomfortable with a rising currency, he said.

"The current levels look okay for the ECB, but how about $1.20? I think the ECB would dislike such a situation, with a weakening U.S. dollar," Murata said.

Reference: Lisa Twaronite

Yuan's strength against the dollar fails to snuff out depreciation expectations

SHANGHAI (Reuters) - China has given those who bet against the yuan a bloody nose this year thanks to policy moves and intervention by the authorities. And yet, many traders and investors are still tipping the Chinese currency to decline against the U.S. dollar in the next year.

They argue that after a Communist Party leadership meeting in the fall, which is expected to solidify President Xi Jinping's grip on power, there will be room for the yuan to weaken. The Chinese government is determined to keep the financial system and the wider economy stable ahead of the gathering, which is held once every five years.

Even after three consecutive months of strengthening against the U.S. dollar, the first such positive run since 2014, many market participants are unconvinced by the gains.

David Qu, markets economist at ANZ Bank in Shanghai, said he doesn't believe that even with its recent strength the yuan's broad downward trend of recent years has been fundamentally reversed. "I don't think the renminbi is back on an appreciation path," he said, using the other name for the currency.

The People's Bank of China (PBOC), the nation's central bank, did not provide answers to faxed questions about the yuan's trajectory.

A Reuters poll of foreign exchange analysts published on August 3 found the yuan is forecast to weaken to 6.85 per dollar in six months and to 6.9 per dollar in a year. It settled at 6.6715 per dollar at the late night close on Monday.

The yuan slumped around 6.5 percent against the surging dollar last year, its largest decline since China unified official and market exchange rates in 1994. The global dollar index .DXY, which measures the dollar against a basket of major currencies, rose 3.6 percent in 2016.

This year, the yuan has gained around 4 percent as the greenback has slumped, but analysts say it should be up even more given that the dollar is down about 9 percent against other major currencies.

Companies wary of foreign exchange risks are keeping the yuan's gains in check.

"Half of our corporate clients who are purchasing dollars at current levels are still betting on a decline in the yuan in the belief that the rebound in the yuan has been a result of the weakness in the dollar and central bank intervention," said a forex trader at a regional bank in Shanghai.

Against other currencies, the yuan's value on a trade-weighted basis has actually fallen more than 1 percent this year, indicating it is actually weaker than the dollar exchange rate suggests.


Tighter controls on capital outflows have been a big reason for yuan strength this year, along with dollar weakness and signs that the Chinese economy is improving, said Wang Tao, chief economist at UBS in Hong Kong.

"Some fundamental drivers of capital outflows remain - there is still strong demand among households and corporates to diversify their wealth into FX and overseas assets, while concerns about domestic asset bubbles and high leverage also remain high," Wang said.

Much of the money changed into dollars in China will actually stay in Chinese bank accounts, rather than circumventing capital export controls, but it sill serves as a hedge, experts say.

Another sign that the market still wants dollars: the daily local closing price has been persistently weaker than the same day's benchmark fixing set by the PBOC prior to the market opening.

This has been the case even after the May introduction of a mysterious "counter-cyclical factor" into the official midpoint formula, with this X factor designed to reduce price swings and stabilise market expectations. In 44 out of 53 trading sessions between June 1 and August 14, the yuan was weaker than the midpoint at the 4:30 p.m. close.

Shan Kun, head of local-markets strategy at BNP Paribas in Shanghai, said impetus for the yuan to retreat could grow.

"We have concerns that companies and financial institutions could decide that the yuan has become too strong in a short period of time and resume expansion of their holdings of dollar-denominated assets, and increase their enthusiasm for dollar buying," Shan said.

Foreign currency deposits held by households and companies have been rising steadily this year. The volume stood at $793.1 billion at the end of June, up 20.9 percent from a year earlier, official data from the central bank showed.

Derivatives and other gauges also suggest weakness ahead.

One-year dollar/yuan non-deliverable forwards, considered the best available proxy for forward-looking market expectations for the yuan's value, on Monday showed that the yuan was expected to weaken to 6.8205 per dollar, a drop of more than 2 percent from the day's midpoint.

One-year risk reversals for the dollar against the yuan onshore, a gauge that measures the premium paid for calls over puts, have shown an upward trend since late July to a nearly two-month high at one point on Monday. That indicates that bullish call options remained more expensive than bearish put options, underscoring how the market is positioning for further yuan depreciation.

"The Chinese yuan would be still vulnerable to any upward correction in the U.S. dollar. If there is a potential rebound in the dollar, the impact on the yuan would be relatively huge," said Ken Cheung, senior Asian FX strategist at Mizuho Bank in Hong Kong.

Reference: Winni Zhou and John Ruwitch

Tuesday, 15 August 2017

5 Chart Reading Skills

An Educative Trading Article

Learning the basic skills in forex, such as how to read forex charts is really important.
This is because once you have this vital skill under your belt, it will be a lot easier and quicker when the time comes for you to learn and practice an actual forex trading system.
By the time you finish this article, you'll learn how to read forex charts, as well as know the pitfalls that can occur when reading them, especially if you haven't traded forex before.

Firstly, let's revise the basics of a forex trading as this relates directly to how to read forex charts.
Each currency pair is always quoted in the same way. For example, the EURUSD currency pair is always as EURUSD, with the EUR being the base currency, and the USD being the terms currency, not the other way round with the USD first. Therefore if the chart of the EURUSD shows that the current price is fluctuating around 1.2155, this means that 1 EURO will buy around 1.2155 US dollars.

And your trade size (face value) is the amount of base currency that you're trading. In this example, if you want to buy 100 000 EURUSD, you're buying 100 000 EUROs.
Now let's have a look at the 5 important steps on how to read a forex chart:

1. If you buy the currency pair, that is, you're long the position; realize that you're looking for the chart of that currency pair to go up, to make a profit on the trade. That is, you want the base currency to strengthen against the terms currency.
On the other hand if you sell the currency pair to short the position, then you're looking for the chart of that currency pair to go down, to make a profit. That is, you want the base currency to weaken against the terms currency.
Sounds pretty simple so far.

2. Always check the time frame displayed. Many trading systems will use multiple time frames to determine the entry of a trade. For example, a system may use a 4 hour and a 30 minute chart to determine the overall trend of the currency pair by using indicators such as MACD, momentum, or support and resistance lines, and then a 5 minute chart to look for a rise from a temporary dip to determine the actual entry.
So ensure that the chart you're looking at has the correct time frame for your analysis. The best way to do this is to set up your charts with the correct time frames and indicators on them for the system you're trading, and to save and reuse this layout.

3. On most forex charts, it is the BID price rather than the ask price that's displayed on the chart. Remember that a price is always quoted with a bid and an ask (or offer). For example, the current price of EURUSD may be 1.2055 bid and 1.2058 ask (or offer). When you buy, you buy at the ask, which is the higher of the 2 prices in the spread, and when you sell, you sell at the bid, which is the lower of the two prices.
If you use the chart price to determine an entry or exit, realize that when you place an order to sell when the chart price is say 1.330, then this is the price that you'll sell at assuming no slippage.
If on the other hand, you place an order to buy when the chart price is the same price, then you'll actually buy at 1.3333. A forex system will often determine whether your orders will be placed simply according to the chart price or whether you need to add a buffer when buying or selling.
Also note that on many platforms, when you're placing stop orders (to buy if the price rises above a certain price, or sell when the price falls below a certain price) you can select either "stop if bid" or "stop if offered".

4. Realize that the times shown on the bottom of forex charts are set to the particular time zone that the forex provider's charts are set to, be it GMT, New York time, or other time zones.
It's handy to have a world clock available on your computer desktop in order to convert the different time zones. This is important when you're trading major economic announcements.
You'll need to convert the time of an announcement to your local time, and the chart time, so you'll know when the announcement is going to happen, and therefore when you need to trade.

5. Finally, check whether the times on your forex charts corresponds to when the candle opens or when the candle closes. Your charting software may be different to someone else's in this way.
The reason I mention this, is that if you need to trade major economic announcements, either by entering a trade based on the movements that happen after the announcement, or to exit a trade before the announcement in avoid getting stopped out during it, then you need to be precise (to the minute!) as these trades are performed according to what happens at the 1 minute immediately after the announcement, not the candle afterwards!

So there you have it.
You now have the 5 essential keys to how to properly read forex charts, which will help you to avoid the common mistakes which many forex beginners make when looking at charts, and which will speed up your progress when you're looking at forex charting packages, and forex trading systems that you want to trade!
Now since you know this, practice looking at forex charts with each of these 5 points in mind.

Reference: Mark Hamburg

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Asian shares, dollar rally as North Korea blinks

TOKYO (Reuters) - Asian shares rose and the dollar rallied on Tuesday after North Korea's leader signaled that he would delay plans to fire a missile near Guam, easing tensions and prompting investors to move back into beaten-down riskier assets.

Futures suggested the cheer was carrying over into European trading, with the Eurostoxx 50 up 0.2 percent, DAX futures up 0.3 percent and FTSE futures up 0.1 percent.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was 0.3 percent higher in afternoon trade, with Australia up 0.4 percent. South Korea's markets were closed for a holiday.

Helped as well by a weaker yen, Japan's Nikkei stock index .N225 finished up 1.1 percent, a day after skidding 1 percent to a 3-1/2-month low.

"Worries about a conflict between the United States and North Korea are not completely gone, but the market seems to be settled now," said Masashi Oda, general manager at the strategic investment department at Sumitomo Mitsui Trust Asset Management.

On Wall Street on Monday, U.S. stocks recovered from last week's selloff, when fears of such a conflict helped wipe out nearly $1 trillion from global equity markets. The S&P 500posted its biggest one-day percentage gain since April.

S&P 500 e-mini futures ESc1 were up 0.2 percent in Asian trade.

North Korea's leader Kim Jong Un received a report from his army on its plans to fire missiles towards Guam and said he would watch the actions of the United States for a while longer before making a decision, the North's official news agency said on Tuesday.

U.S. President Donald Trump did not have any fresh words for Pyongyang, but Defense Secretary Jim Mattis warned on Monday that the U.S. military would be prepared to intercept a missile fired by North Korea if it was headed to Guam.

"We have North Korea saying they will wait, and Trump not saying anything at all, compared to his past promise of 'fire and fury,'" said Mitsuo Imaizumi, chief FX strategist at Daiwa Securities.

"That added up to good news for the dollar, bad news for the yen," he said.

The yen tends to gain in times of crisis on assumptions that Japanese investors will repatriate assets.

The dollar was up 0.7 percent at 110.38 yen JPY=, pulling further away from last Friday's low of 108.72 yen, while the euro gained 0.5 percent to 129.76 yen .

The euro was 0.2 percent lower on the day against the dollar at $1.1757 EUR=, while the dollar index, which tracks the greenback against a basket of six major rivals, added 0.3 percent to 93.662 .DXY.

Against the Swiss franc CHF= the dollar rose 0.3 percent, after jumping more than 1 percent on Monday.

Higher U.S. yields also gave the dollar a lift. The yield on the benchmark 10-year U.S. Treasury note rose to 2.246 percent from its U.S. close of 2.218 percent on Monday.

The dollar rose as traders unwound their bearish bets made last week after Friday's disappointing U.S. inflation data dampened expectations that the Federal Reserve would raise interest rates again this year.

But New York Fed President William Dudley rekindled rate-hike hopes on Monday, saying that it was not unreasonable to think the central bank would begin trimming its $4.2 trillion balance sheet in September and raise rates again this year, provided economic data holds up.

Market pricing for the odds of a December hike has moved back to roughly 50-50.

Crude oil futures steadied after tumbling more than 2.5 percent on Monday in volatile trade.

U.S. crude futures CLc1 rose 3 cents to $47.62 a barrel. Brent crude added 6 cents to $50.79.

Spot gold XAU= prices plunged 0.7 percent to $1,273.22 an ounce, extending their fall from Monday when they shed half a percent.

Reference: Lisa Twaronite

Sterling little changed in face of Brexit noise

LONDON (Reuters) - Sterling inched down against a broadly stronger dollar on Monday, holding close to the $1.30 level that has proved an anchor for the past month despite a series of negative headlines from the first weeks of Brexit negotiations.

Banks are divided on the outlook for the pound for the rest of this year, with some forecasting more losses as the economy slows while others argue the worst of the market reaction to Britain's decision to leave the European Union is over.

It dipped 0.15 percent to $1.2991 in early trade in London, while holding roughly steady at 90.81 pence per euro.

Signs Britain's pro-European Chancellor of the Exchequer Philip Hammond was suspending hostilities with "hard" Brexiteers in the cabinet who want a cleaner break from the EU did little to shift prices.

"At this stage the market does not expect the newsflow around Brexit negotiations to sound very positive," said Sam Lynton-Brown, a strategist with BNP Paribas in London.

"But the longer it takes for the market to be able to price in a transitional deal, the more investors will have to prepare for a cliff edge scenario (in 2019)."

Hammond and ardent Brexiteer trade minister Liam Fox set out a joint position in the Sunday Telegraph that a transition period was needed when Britain leaves the EU, but that single market membership would still end and the interim period would not be used to stop Brexit.

The pound reached as high as $1.3267 per dollar on Aug. 3 on the a brief surge in expectations that the Bank of England could raise interest rates over the next year.

But the Bank's latest meeting and minutes quashed much of that talk in the market and a retreat in pricing on rates has weakened the pound since.

Inflation data on Tuesday and wage numbers a day later should be the centrepiece of this week. If inflation as expected inches up to 2.7 percent it will underline the pain being felt by households whose income is not rising as fast.

A survey released on Sunday showed British employers expect to raise pay only minimally over the next 12 months despite hiring more staff, suggesting wage growth will remain a problem for consumer spending.

"Our economists see only modest changes in average earnings," said RBC strategist Elsa Lignos. "The puzzle of impressive employment growth without upward pressure on wages will persist."

Reference: Patrick Graham

Monday, 14 August 2017

Learning to Trade Forex in Seven Steps

An Educative Trading Article

If you are interested in learning to trade forex successfully, then the most common path for an aspiring trader these days is to search the Internet for information to apply immediately to their live forex trading account. The problem is that their search often leads them to destinations where there are plenty of false promises, bad ideas, negativity and an obsession with indicators.
This easy access to forex guru's who fuel the idea that forex trading is the holy grail of easy money, then financially feed off those same people they have sold this idea to. At the end of the day what many of these forex guru's sell is a gross misrepresentation of what it takes to trade forex for a living.    
Forex Trading is not easy. You can become a good forex trader though dedication and by treating forex trading as you would any other skill. The reality is that it is hard work and must be treated with the same amount of seriousness as you would any other career.
The effect of all these gurus is that many forex traders start off overly optimistic with unrealistic goals. Whilst there is nothing wrong with a positive mental attitude but this positivity must be built on strong foundations and realistic expectations.  
New forex traders normally start their career by purchasing some secret set of indicators and they are quickly punished for their naivety. Many of these forex traders then purchase a different set of secret indicators until they become disillusioned and then quit trading.  
In fact, many forex traders that are now successful went through this learning process, including myself. This is only a problem if you refuse to learn from your mistakes. You need to break from this cycle of reliance on secret indicators and guru methods to be successful.  
You help yourself in the beginning; by learning to think for yourself and understanding that whilst anyone can trade forex, to be successful, you must learn to BE a forex trader.

To BE A Forex Trader  

To trade forex is easy, all you need is a forex trading account with money in it and then you enter the foreign exchange market and start trading.    
To be a forex trader is more work. You need to grow from the starting point of having very little knowledge to the stage where you have a trading plan, understand the concepts and behaviour of the forex market and be able to trade with a cool head and understand that wins and losses are all part of being a Forex Trader.
Learning How to Trade Forex by thinking like a Forex Trader in Seven Steps.

1. Understand your place in the Forex Market

This is very important you must understand that you are very small fish in a big ocean.    
In the Foreign Exchange Market the majority of the liquidity is coming from big banks and experienced institutional traders. These are the big fish. The big fish will happily enjoy you as a little snack.   
You are only fooling yourself if you think it will be easy to take money off these big forex traders.    
You have to learn to swim alongside these big fish and catch the same currents they do. Swimming against them just marks you as prey and sooner or later you will be eaten. 

2. Learn to read the Forex Charts and Understand the Foreign Exchange Market.

Many novice forex traders believe that these big forex traders have access to some secret forex trading strategy or use a secret set of indicators, but the truth is this is just not the case.  
These major forex players are using simple, but proven technical analysis techniques - most commonly horizontal support/resistance, identification of trading ranges, Fibonacci these are then coupled with fundamental themes. 
Begin by accepting that the other major participants are highly experienced in the market and they make money because of experience and by a complete understanding of the core skills and not because they hold a holy grail of secret indicators.

3. Money Management

It is crucial that you understand as a novice forex trader the emphasis is not on how much you can make from forex trading but on how you manage what you have.
This is the most common downfall of all novice traders. It is common place to see a starting trader risk the majority of their account on one or two positions.   
This style of trading is not sustainable and professional traders do not trade in this manner. Everyone sometime in their career will have a string of bad trades.  A typical number might be 10 losing trades in a row. The question is do you have a money management plan in place that enables you to survive this?

4. Focus on the Market

Many novice forex traders open their forex charting software and activate their latest hot indicator or tool and proceed to place their trades as per the tools recommendations. This style of forex trading is unlikely to have much long term success.  
When these indicators fail to generate the required profits then these traders then move rapidly on to another set of indicators.  
You must focus on the forex market and understand what the indicators are telling you so that you can pick the forex trades which have the best probability of being winners.
Successful forex traders use indicators and tools as Fibonacci, Pivot points, price channels, MACD, RSI etc.  These tools by themselves do not make a successful trader. There are many successful traders and unsuccessful traders who use the exact same indicators.  
The key is that successful traders understands how the market behaves around the indicators and understands what the signals actually mean.     
The best way to achieve this is to stop swapping between tools and select those that compliment your trading plan, understand how they work, and then spend time in the market experiencing them.

5. Plan your trade and trade your plan.   

This is a common saying that seems to get lost on novice traders. It should be every trader's goal to make pips on each forex trade as per their trading plan.  Forex Traders must treat each trade as a business decision by calculating their risk and defining their entries and exits points, those that do not open themselves to big losses when a trade goes bad.  
Many novice traders seem to lack the discipline to follow a plan for each trade.  So what happens is typically the following; a novice trader will see a potential set-up, they decide on some arbitrary sum to buy or sell with a quick guesstimate, then place the trade without analysing any risk and having an exit strategy.   
Of course this way of trading can be profitable over the short term, more down to luck than skill.  But eventually the luck runs out and the trader is caught napping and a common result is a wiped out account.  
The first question novice traders tend to ask themselves how much will I make on this forex trade?
The first question experience traders tend to ask themselves is how much is my potential loss/risk?

6. Your mind is your strongest asset and weakest link.

Entire books have been dedicated to the subject of psychology and its role in trading. That doesn't mean they are all going to help you, but you should take this as a sign that the subject is not to be ignored. 
First you must understand the role psychology plays in trading.  You must learn to understand your personality traits and how they might affect your trading style.  
A trader I know is a bad loser and when he has a bad trade, he had a habit of going straight back and trying to win those pips back with even worse results.  But he understands this as a weakness and when he has a bad trade, he takes a break of 20 minutes before he goes back to trading so that his emotions do not affect his trading decisions.
Second you must make it your aim to never stop learning. You cannot get yourself to a certain level and then become complacent. Every day is a learning experience in some way or other and you must be prepared to learn lessons and invest time in improving your skills and experience. The day you stop learning is the day you should stop trading.

7. Understand the Forex Market is always right or Expect the Unexpected.   

The forex market is an interesting place, but there is one thing every trader needs to learn. Always expect the unexpected and do not get wrapped up in past successes. No matter what your charts or indicators tell you; sometimes the forex market will just do the opposite.  
Whatever happens in the market you must maintain an objective outlook on your strategy and the forex market and ensure that bubbles and crashes do not derail you in the long term.
By following these steps and learning to become a forex trader rather than just trading the forex market, you will put you on the path to ultimate success as a profitable forex trader. This is something that 90% of all novice traders fail to achieve.

Reference: Adrian Faiers

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Dollar nurses losses as outlook remains wary

LONDON (Reuters) - The dollar edged lower against a trade-weighted basket of currencies on Monday after posting its biggest weekly drop in three weeks as expectations of U.S. rate increases dwindled further after weak inflation data.

With Japanese second-quarter growth expanding 1 percent quarter-on-quarter, fueled by rising consumption and capital expenditure, investors stepped in to buy risky assets after tensions over North Korea.

Renewed risk appetite also encouraged investors to borrow in relatively weak currencies such as the dollar and the franc and invest in the euro which is the best performing currency in the G10 FX universe.

"Despite some near-term headwinds for the euro after the recent rise, it is set to rise against the dollar because of the relatively favorable economic outlook," said Rob Carnell, head of research at ING in Singapore.

The dollar was trading at 93.05, a shade lower from Friday's session when it came under pressure after softer-than-expected U.S. inflation data for July dampened expectations for another Federal Reserve interest rate hike this year.

Heightened geopolitical risks also weighed on the dollar's outlook.

Chinese President Xi Jinping said on Saturday that there needs to be a peaceful resolution to the North Korean nuclear issue, and in a telephone call with U.S. President Donald Trump he urged all sides to avoid words or action that raise tensions.

The euro rose 0.1 percent to $1.1827 and was approaching a 2-1/2 year high of 1.1910 hit earlier this month.

Reference: Saikat Chatterjee

Asian shares bounce after losses, dollar capped by weak U.S. inflation

TOKYO (Reuters) - Asian stocks bounced on Monday after three straight losing sessions, tracking a firmer Wall Street, while the dollar was capped by tensions on the Korean peninsula and doubts that the Federal Reserve will hike interest rates again this year.

Spreadbetters expected the upward momentum for equities to continue in Europe, forecasting Britain's FTSE .FTSE to open 0.2 percent higher, Germany's DAX .GDAXI to start 0.25 percent higher and France's CAC .FCHI to open up 0.3 percent.

U.S. stock futures rose 0.3 percent, suggesting a higher open later in the day.

Asian markets were largely unfazed by a slew of activity data from China which was softer than forecast, though still largely solid.

The world's second-largest economy had been widely expected to lose a bit of steam in coming months after a surprisingly strong first half. But economists do not expect a hard landing, with the government keen to ensure stability ahead of a Communist Party leadership reshuffle in the autumn.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.8 percent. It had lost 3 percent over the previous three sessions as tensions escalated between the United States and North Korea.

Australian stocks rose 0.75 percent and South Korea's KOSPI .KS11 climbed 0.6 percent.

Hong Kong's Hang Seng .HSI was up 0.9 percent and Shanghai .SSEC added 0.7 percent.

Geopolitical risks were expected to remain a key theme for the global markets in the near term, as North Korea celebrates Liberation Day on Tuesday to mark the end of Japanese rule.

Investors also braced for tensions ahead of Aug. 21, when an annual joint U.S.-South Korean military exercise is due to begin.

"Due to caution towards a further escalation in tensions over North Korea, U.S. yields and equities are expected to decline and the yen is likely keep appreciating this week," said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.

Japan's Nikkei .N225 bucked the trend and fell 1 percent as a stronger yen overshadowed much better-than-expected second quarter economic growth.

"Once geopolitical risks settled down, investors will likely revisit the fact that Japan's fundamentals are strong," said Hikaru Sato, a senior technical analyst at Daiwa Securities.

The three major U.S. stocks indexes snapped three days of losses and ended higher on Friday, as investors bet on slower U.S. rate hikes following weaker-than-expected consumer price data. But gains were muted by increasingly aggressive exchanges between Washington and Pyongyang.

U.S. Treasury yields, which already declined on the North Korean concerns, fell further on Friday on the soft U.S. consumer prices data. The benchmark 10-year Treasury yield touched 2.182 percent on Friday, its lowest since late June, before pulling back a little to 2.204 percent on Monday.

Friday's data showed the U.S. consumer price index edged up just 0.1 percent last month after it was unchanged in June. Economists polled by Reuters had forecast the CPI rising 0.2 percent in July.

The dollar index against a basket of six major currencies crawled up 0.1 percent to 93.145 .DXY after it slipped about 0.4 percent on Friday.

The greenback rose 0.4 percent to 109.585 yen JPY= after slipping to 108.720 on Friday, its weakest since April 20.

The yen showed little reaction to second-quarter gross domestic product data which revealed that the economy expanded for a sixth straight quarter led by private consumption and capital expenditure.

While growth was faster than expected, accelerating to a 4.0 percent annualised rate, it is not expected to nudge the Bank of Japan into dismantling its massive stimulus programme any time soon, as inflation remains stubbornly weak.

The euro was flat at $1.1815.

Crude oil prices dipped following data showing a slowdown in Chinese refining activity growth.

Brent was 9 cents lower at $52.01 a barrel.

Gold hovered near a two-month high, benefiting from the U.S.-North Korean tensions and Friday's weak U.S. inflation data. The dollar's recent weakness was also seen to be helping gold.

Spot gold XAU= was a shade lower at $1,287.51 an ounce after reaching $1,291.86 on Friday, its highest level since June 7.

Other precious metals such as silver XAG= and platinum XPT= were also buoyant.

Reference: Shinichi Saoshiro

Sunday, 13 August 2017

Gold Trading

An Educative Trading Article

On August 11, 2011, the Chicago Mercantile Exchange (CME) raised the margins on gold futures by 22%, effectively reducing the demand for gold. CME group is the world's largest gold futures market which takes measures to reduce certain risks associated with volatility. The organization can have an effect on the price of gold by making it harder or easier to trade futures contracts. This was not an isolated decision; Shanghai Gold exchange also raised its requirements to 11% from 10%. If you are a hedger or a speculator, gold and silver futures contracts offer a world of profit-making opportunities.


A margin is basically a set of funding requirement which must be met in order to receive a type of loan for trading. The trader can use this loan to purchase more of a security. These requirements are made up of the initial margin which is the amount of money that a trader needs to contribute to open a position. This was raised 22% from $6,075 to $7,425 on COMEX 100 Gold Futures. There is also the maintenance margin which is the lowest value the position can reach before the participant either needs to deposit more money or sell their position (known as a margin call).
This was raised from $4,500 to $5,500. These requirements are typically different based on the institution, and the type of security. These futures margin amounts are set by CME Clearing and changes are announced 24 hours in advance, so this was announced on August 10, 2011 and implemented August 11, 2011. The price of gold dropped 1.5% on the news.

How is This Regulation Going to Affect Traders and the Price of Gold?

In the short term, this increase in margin will reduce demand and ease the upward trend of the precious metal. The volatility should decrease as well because fewer traders will speculate on the price of gold. The change will not be drastic, but the intention is to increase predictability with lower swings in price.
In the long term, other factors contribute to the price of gold such as demand for industrial use, or in electronics. Also if individuals feel there might be an increase in inflation they might move to gold as a hedge to the loss in buying power of their currency.

Some traders use gold as an alternative to exposure to the stock market if they feel the markets are due for a tumble. With the new credit rating drop in the U.S., and other poor economic reports coming out such as smaller than expected rises in the retail sales numbers, gold might be used as an alternative "safe haven" for investors. In the long run, gold's price is hardly affected by these margin increases or decreases. There is a strong correlation between gold's value and the strength of currencies trading on foreign exchanges.

Who Sets This Margin Price?

The CME Clearing house is integrated with CME Group and acts as the counter party between sellers and buyers. They are the central futures clearing mechanism for the Chicago Mercantile Exchange. They normally act as a neutral participant and attempt to set margins so market participants such as traders have enough money contributed to cover most movements. Higher movements (known as high volatility) mean margin requirements need to be increased.
Due to many factors such as fear in the markets, and global economic challenges, gold can see new heights. These increased margins are one measure that the GME Clearing uses to decrease risks associated with high volatility and essentially lending money to traders. It does affect short term gold prices, but long term gold is based more on fundamental external factors.

Reference: Peter Cherewyk

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