Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.
Please refer to the table below for more details:
The above data is for reference only, please refer to the MT4/MT5 software for specific data.
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Stocks experienced a positive surge as investors remained hopeful that an agreement on the U.S. debt ceiling could be reached between congressional leaders and President Joe Biden, thereby averting a catastrophic default. The Dow Jones Industrial Average rose by 408.63 points or 1.24%, reaching 33,420.77, while the S&P 500 increased by 1.19% to 4,158.77, and the Nasdaq Composite advanced 1.28% to 12,500.57. Following a meeting with Biden, House Speaker Kevin McCarthy stated that progress had been made and a potential deal could be reached by the end of the week. Biden cancelled part of an international trip to focus on the negotiations, expressing confidence in avoiding a default.
Concerns regarding a potential default had been impacting the markets, with the Dow experiencing a 2% decline this month, including a 1% drop on Tuesday. Treasury Secretary Janet Yellen emphasized the immediate need to raise the debt limit, as the country faced the risk of defaulting as early as June 1. The market sentiment improved on Wednesday as regional bank shares rebounded, particularly Western Alliance Bancorp, which reported positive deposit growth. This led to a 10.2% surge in Western Alliance’s stock and a more than 7% increase in the SPDR S&P Regional Bank ETF (KRE), contributing to the overall positive market trend.
Data by Bloomberg
On Wednesday, all sectors experienced an overall positive performance in the market. The financial sector led the gains with a significant increase of 2.09%, followed closely by the energy sector at 2.07%. Consumer discretionary stocks also saw a notable rise of 2.04%, while industrials recorded a gain of 1.70%. Real estate and information technology sectors both contributed to the positive trend, rising by 1.29% and 1.28% respectively. Communication services also saw a modest increase of 1.18%. However, the materials sector showed a relatively lower growth of 0.67%.
In contrast, the health care sector had a marginal gain of 0.10%, while consumer staples experienced a slight decline of -0.10%. The utilities sector saw a relatively larger decrease of -0.36%. Overall, Wednesday’s market performance indicated a broad positive sentiment, particularly driven by strong performances in the financial, energy, and consumer discretionary sectors.
Major Pair Movement
The dollar initially strengthened on Wednesday due to rising Treasury yields but later lost some of its gains as risk-on sentiment increased. The yen was the exception, weakening broadly against the dollar. The Japanese currency fell 0.9% against the dollar as USD/JPY approached key resistance levels.
EUR/USD experienced a rebound from its lows, although it still declined by 0.2%. Market expectations for aggressive rate cuts by the Federal Reserve in the second half of the year decreased, while the European Central Bank’s rate hike expectations remained limited. Concerns over euro zone data and a weaker reopening in China impacted demand prospects. The U.S. inflation rate remained high, and the Federal Reserve is monitoring it closely. Sterling, being more sensitive to risk, recovered to near-flat levels from its recent lows.
In addition to the ongoing U.S. debt ceiling negotiations, Thursday’s focus will be on U.S. initial jobless claims, with a decrease anticipated. The outcome of these claims will impact the dollar. Other key data to be released on Thursday includes the Philly Fed index and existing home sales.
Picks of the Day Analysis
EUR/USD (4 Hours)
EUR/USD Drops to Monthly Lows Against Dollar Amid ECB Divergence and Rate Hike Uncertainty
On Wednesday, the EUR/USD dropped to monthly lows near 1.0800 but later recovered some losses during the American session. The Euro faced downward pressure due to divergence among European Central Bank (ECB) officials and uncertainty regarding future rate hikes. Eurozone bond yields rose, although US yields outpaced them. Risk sentiment improved, leading to a slight weakening of the US Dollar. The Federal Reserve showed some division on their next course of action, with a 28% chance of a rate hike at the June meeting according to the CME Fed Watch Tool. Mixed US housing data was released, and upcoming data includes Jobless Claims, the Philly Fed index, and Existing Home Sales. While the debt ceiling situation has become less dramatic, a resolution is still pending.
According to technical analysis, the EUR/USD pair is currently moving sideways after a downward movement on Wednesday. The price is currently trading between the lower and middle bands of the Bollinger Bands. It is expected that the EUR/USD will make a slight upward move towards the middle band before determining its next direction. The Relative Strength Index (RSI) is currently at 36, indicating an overall bearish trend in the EUR/USD market.
Resistance: 1.0885, 1.0930
Support: 1.0820, 1.0785
XAU/USD (4 Hours)
Gold (XAU/USD)Extends Decline as Dollar Strengthens Despite Positive Market Sentiment
Spot Gold (XAU/USD) experienced a decline, reaching its lowest level for May at $1,974.99 per troy ounce. The XAU/USD pair rebounded slightly after the opening of Wall Street and traded around $1,980. The fall in gold prices was driven by renewed demand for the US Dollar, despite an improved market mood. President Joe Biden and congressional leaders met to discuss extending the debt ceiling, and positive statements from Republican Kevin McCarthy raised hopes of reaching a deal by the end of the week. Asian and European stock markets closed with mixed results, while American markets showed substantial gains, which had a dampening effect on the US Dollar. Federal Reserve officials attempted to downplay the likelihood of a rate cut later in the year, emphasizing that more work needs to be done. Cleveland Fed President Loretta Mester stated that she believes the central bank has not yet reached a point where interest rates can be held steady, as inflation remains persistent. While financial markets have priced in a pause in rate hikes for June and July, Fed members are still discussing whether or not to proceed with the pause.
According to technical analysis, XAU/USD continued to fall on Wednesday, leading to further downward pressure on the lower band of the Bollinger Bands. There is a possibility that XAU/USD may experience an upward movement towards the middle band of the Bollinger Bands. Currently, the Relative Strength Index (RSI) stands at 34, indicating that XAU/USD is in a bearish trend.
Stocks experienced a decline on Tuesday, influenced by Home Depot’s underwhelming forecast. The financial market also focused on a crucial meeting between President Joe Biden and congressional leaders regarding the U.S. debt ceiling. The Dow Jones Industrial Average closed below its 50-day average for the first time since March 30, with a drop of 336.46 points or 1.01% to 33,012.14. Similarly, the S&P 500 decreased by 0.64% to 4,109.90, while the Nasdaq Composite fell 0.18% to 12,343.05.
The disappointing performance of Home Depot, a Dow member, contributed to the overall decline. The company reported lower-than-expected quarterly revenue and revised its full-year guidance due to consumers postponing major home improvement projects. Furthermore, April’s retail sales figures were weaker than economists predicted, with a 0.4% increase instead of the anticipated 0.8%.
The financial market has remained stuck within a range of 3800 to 4200 on the S&P 500 since November, indicating the uncertainty felt by investors regarding policy outcomes. Questions surrounding the economy’s response, consumer spending sustainability, and the duration of these conditions have contributed to this stagnant state, according to U.S. Bank Wealth Management’s Bill Merz.
Investors are anxiously awaiting progress on debt ceiling negotiations, with Treasury Secretary Janet Yellen warning of a potential default as early as June 1 if no agreement is reached. Yellen emphasized the severe consequences of a default, including a potential breakdown of financial markets and worldwide panic.
President Biden maintains optimism about the ongoing negotiations, while House Speaker Kevin McCarthy highlights significant obstacles that still need to be overcome. Biden has stood firm on his position that raising the debt ceiling is non-negotiable, while McCarthy has advocated for a deal linking the increase to spending cuts. In response to the pressing matters, Biden will curtail his upcoming international trip and prioritize the debt ceiling negotiations.
Data by Bloomberg
On Tuesday, the overall market experienced a decline of 0.64% in price change across all sectors. However, some sectors managed to show positive gains, with Communication Services leading the way with a 0.59% increase, followed by Information Technology with a modest gain of 0.16%.
On the other hand, several sectors faced notable losses, with Real Estate taking the biggest hit, declining by 2.61%. Energy and Utilities also struggled significantly, with both sectors experiencing declines of 2.54% and 2.30%, respectively. Industrials and Materials also faced notable losses, dropping by 1.36% and 1.64%, respectively. Other sectors that experienced negative price changes include Consumer Staples (-0.88%), Financials (-0.97%), Health Care (-0.82%), and Consumer Discretionary (-0.25%).
Major Pair Movement
The dollar index rebounded on Tuesday, recovering from initial losses as strong U.S. data and opposition to rate cuts by Federal Reserve speakers lifted Treasury yields. However, the dollar’s gains were limited as 2- and 10-year rates faced resistance from their 200-day moving averages, resulting in modest pullbacks.
While U.S. data showed solid performance, it was marred by downward revisions to previous months and April’s retail sales rise of 0.4% fell short of the forecasted 0.8%. However, the control group’s 0.7% increase, surpassing the 0.3% forecast, provided some offsetting positive news. Industrial production was revised down, almost offsetting the beat in April.
As a result, EUR/USD remained largely unchanged, while sterling experienced a 0.36% loss. USD/JPY surged after the U.S. data release, reaching a high of 136.69 on EBS. Despite this, the pullback in Treasury yields limited USD/JPY’s gain to only 0.15%.
Picks of the Day Analysis
EUR/USD (4 Hours)
EUR/USD Retreats as Stronger US Dollar and Hawkish Sentiment Drive Market Dynamics
On Tuesday, the EUR/USD briefly surpassed 1.0900 but retreated to 1.0855 due to a stronger US Dollar. The Dollar gained strength due to risk aversion, higher US yields, and hawkish comments from Federal Reserve officials, despite mixed US data. In Europe, the German ZEW Economic Sentiment index declined, while Eurozone Preliminary GDP data showed modest growth.
The Euro was largely unaffected by these numbers. Market participants anticipate another rate hike in June, and upcoming releases include Eurostat’s final inflation for April and a speech by the European Central Bank’s De Guindos. In the US, Retail Sales and Industrial Production had mixed results. Fed officials’ remarks supported the Greenback, pushing US yields higher and impacting the EUR/USD exchange rate. At present, the US Dollar maintains its dominant position.
According to technical analysis, the EUR/USD pair is moving in consolidating mode and keep moving between the lower and middle band of the Bollinger band. It is anticipated that the EUR/USD will make a lower move and push the lower band and reach the support level. The Relative Strength Index (RSI) is currently at 38, indicating an overall bearish trend in the EUR/USD market.
Resistance: 1.0885, 1.0930
Support: 1.0820, 1.0785
XAU/USD (4 Hours)
Gold (XAU/USD)Drops Below $2,000 as US Dollar Strengthens on Retail Sales
On Tuesday, Spot Gold (XAU/USD)experienced a decline, falling below the $2,000 mark due to increased buying of the US Dollar by market participants following the release of several US economic data. While US Retail Sales in April showed a modest 0.4% monthly increase, it fell short of expectations.
However, there was some positive news as April Capacity Utilization met expectations and Industrial Production surpassed predictions with a 0.5% rise. Additionally, the NAHB Housing Market Index improved to 50 in May from its previous level of 45.
These data outcomes affected the market sentiment negatively, leading to US indexes trading in the red and European indexes ending the session with modest losses. Furthermore, government bond yields surged, with the 10-year Treasury note yielding 3.56% (up 5 basis points) and the 2-year note offering 4.10% (up 10 bps) on the day.
The ongoing debt-ceiling negotiations between President Joe Biden and lawmakers also contributed to the cautious sentiment as investors awaited updates to avoid a default.
According to technical analysis, XAU/USD fell on Tuesday after some flat movement in the last few days, creating a push lower movement for the lower band of the Bollinger Band. There’s a possibility that XAU/USD might move higher to reach the middle band of the Bollinger band. Currently, the Relative Strength Index (RSI) stands at 34, indicating that XAU/USD is in the bearish mode.
The S&P 500 experienced a slight increase at the beginning of the week as traders analyzed ongoing negotiations regarding the debt ceiling. The broader index rose by 0.3% to reach 4,136.28 points. Meanwhile, the Dow Jones Industrial Average ended its five-day losing streak, gaining 47.98 points (0.14%) and reaching 33,348.60 points. The tech-heavy Nasdaq Composite outperformed both indices, rising by 0.66% to reach 12,365.21 points. The focus for investors was on the debt ceiling talks, which were rescheduled to this week after being postponed from Friday. President Joe Biden is expected to meet with top congressional leaders on Tuesday to discuss this matter.
Investors are closely monitoring the debt ceiling negotiations, as failure to reach an agreement could have severe financial consequences. Treasury Secretary Janet Yellen warned that a failure to address the debt ceiling could lead to “financial chaos.” However, Yellen expressed optimism over the weekend, stating that negotiations were active and that areas of agreement had been found.
The market remains cautious, as each day of delay and lack of progress makes it increasingly challenging for the market to gain momentum. Additionally, investors are analyzing the latest economic data, including the May data for the Empire State Manufacturing survey, which showed a significant decline in manufacturing activity in New York. Throughout the week, investors will also be paying attention to major retail reports from Home Depot, Target, and Walmart, which will provide further insight into the state of the consumer.
Data by Bloomberg
On Monday, the stock market witnessed varied price changes across different sectors. Overall, the market experienced a positive trend with an increase of 0.30%. The materials sector performed particularly well, showing a significant rise of 0.85%. Financials and information technology sectors also displayed strong gains, with increases of 0.82% and 0.74% respectively. Industrials saw a moderate increase of 0.51%. However, energy and consumer discretionary sectors had more modest gains of 0.20% and 0.14% respectively. On the other hand, the communication services sector experienced a slight decline of -0.03%. Health care, real estate, consumer staples, and utilities sectors witnessed negative trends, with price decreases of -0.16%, -0.24%, -0.27%, and -1.24% respectively.
Major Pair Movement
On Monday, the US dollar retreated across the board after last week’s risk-off gains, as investors prepared for the upcoming US retail sales report and debt ceiling talks. Market sentiment was mixed as a volatile NY Fed report was met with caution, and several Federal Reserve speakers pushed back against expectations of rate cuts. The dollar index lost 0.25%, while the euro gained in response.
The Australian dollar, considered a high-beta currency, rebounded strongly against the low-beta yen, with AUD/JPY rising over 1% compared to USD/JPY’s modest 0.22% gain. The market remained hopeful that China would increase stimulus measures to support economic growth, and there was speculation that the US would avoid a debt default, boosting risk appetite. Additionally, there was a bounce in US bank stocks, contributing to the positive risk sentiment.
The British pound rallied throughout the day, influenced by risk acceptance flows and anticipation of employment and wage data that could support the Bank of England’s rate hiking stance. The Japanese yen’s gains were limited as the government showed lukewarm reception to the Bank of Japan’s policy review, reducing expectations of accommodative measures being scaled back.
Picks of the Day Analysis
EUR/USD (4 Hours)
Euro Makes Modest Gains Against Weakening US Dollar, Concerns Remain Over Eurozone Data and Debt Ceiling Drama
EUR/USD rose slightly on Monday as the US Dollar weakened following disappointing economic data. However, the Euro faced further losses against the Pound, nearing multi-month lows. Industrial Production in the Eurozone declined by 4.1% in March, surpassing the expected 2.5% decrease. In Germany, the Wholesale Price Index fell 0.4% in April, better than the anticipated -0.9%, while the annual index dropped from 2% in March to -0.5% in April. On Tuesday, Eurozone employment and GDP data for Q1 will be released, along with the May German ZEW survey. The Eurozone is expected to see a marginal expansion, avoiding contraction.
The US Dollar weakened on Monday amid mixed market conditions, influenced by the sharp decline in the US New York Empire Manufacturing index from 10.8 in April to -31.8 in May. Key data to watch on Tuesday includes April’s Retail Sales report. President Biden is set to meet with House Speaker Kevin McCarthy to discuss the debt ceiling issue. Despite higher US bond yields, the decline in the Dollar occurred alongside an improvement in market sentiment.
According to technical analysis, the EUR/USD pair is currently attempting to recover after a few days of downward movement, aiming to reach the middle band of the Bollinger band. It is anticipated that the EUR/USD will make a slight upward move and endeavor to reach the middle band. The Relative Strength Index (RSI) is currently at 36, indicating an overall bearish trend in the EUR/USD market.
Resistance: 1.0885, 1.0930
Support: 1.0820, 1.0785
XAU/USD (4 Hours)
Gold (XAU/USD)Gains Modestly Amid Debt Ceiling Concerns, Stocks and Bond Yields Mixed
Spot gold (XAU/USD) started the week with modest gains, trading around $2,020 per troy ounce. The advance in XAU/USD was supported by a decrease in demand for the US Dollar and an improved market mood. However, caution remained as negotiations related to the US debt ceiling were extended. Investors are closely watching the potential for a US default, with President Joe Biden scheduled to meet with lawmakers on Tuesday to find a resolution.
In the stock markets, there was a positive trend, although momentum was limited. The Dow Jones and S&P 500 saw gains of less than 0.10%, while the Nasdaq Composite performed the best, rising by 56 basis points (bps). Concurrently, government bond yields also increased, with the 10-year Treasury note reaching a yield of 3.51%, up by 4 bps, and the 2-year note remaining unchanged at 4.0%. The rise in US yields acted as a limiting factor for the bullish potential of XAU/USD.
According to technical analysis, XAU/USD has been trading in a flat range for the past few days and has recently reached and is moving around the middle band of the Bollinger Band. The proximity of the upper band to the lower band suggests a potential consolidation phase for XAU/USD. Currently, the Relative Strength Index (RSI) stands at 48, indicating that XAU/USD is in a consolidation mode.
The financial industry anticipates major economic reports this week, focusing on the US Retail Sales and Australia Wage Price Index and Employment Change. These reports are crucial for traders navigating the markets and making informed decisions.
NY Empire State Manufacturing Index | US (15 May) The NY Empire State Manufacturing Index unexpectedly jumped to 10.8 in April 2023 from -24.6 in March 2023. Analysts expect a reading of 8 for May 2023.
Claimant Count Change | UK (16 May) The number of people claiming for unemployment benefits in the UK rose by 28,200 in March 2023, the first increase in three months, and the biggest since February 2021. The UK Claimant Count Change for April will be released on 16 May, with analysts expecting a decrease of 15,000.
Consumer Price Index | Canada (16 May) Canada’s CPI increased by 0.5% in March 2023 compared to February 2023 figures. Data for April will be released on 16 May, with analysts expecting an increase of 0.3%.
Retail Sales | US (16 May) US retail sales dropped 0.6% in March 2023, after falling 0.7% in February 2023. Analysts project a 0.7% increase for April 2023, with the data set to be published on 16 May.
Wage Price Index | Australia (17 May) Australia’s seasonally adjusted Wage Price Index jumped 3.3% year-on-year in Q4 2022, after an upwardly revised 3.2% growth in Q3 2022. Data for Q1 2023 will be released on 17 May, with analysts expecting another increase of 3.5%.
Employment Change | Australia (18 May) Australia’s employment rate increased to 13.88 million, with a surge of 53,000 in March 2023. The unemployment rate stood at 3.5%. The data for April 2023 is set to release on 18 May, with analysts expecting the employment rate to increase by 25,000. The unemployment rate is likely to remain at 3.5%.
Forex trading is a global market that operates 24 hours a day. And it is important to know the best times to trade in order to maximise your profits.
The Forex market can be divided into four major trading sessions: the Sydney session, the Tokyo session, the London session, and the New York session.
source: investopedia.com
The Forex market opens in New Zealand on Monday morning, while it is still Sunday in most parts of the world. The market operates continuously from Monday to Friday, and there are no formal closing times during the week.
As one region’s Forex market closes, another region’s market opens or is already open, resulting in overlapping trading periods, which are often the most active times in Forex trading.
Apart from weekends, there are only two public holidays when the Forex market remains closed worldwide: Christmas and New Year’s Day.
You should be aware that the opening hours of the Forex market may vary in March, April, October, and November due to different countries’ daylight savings schedules. This is an important consideration if you plan to trade during those times.
Traditionally, the Forex market has had three main trading sessions that traders tend to focus on instead of trading all day and night. This is referred to as the “Forex 3-session system”, which includes the Asian, European, and North American sessions, also known as Tokyo, London, and New York.
Tokyo session
The Tokyo session starts at 12:00 am GMT. Japan is the world’s third-largest Forex trading centre. During the Asian session, around 20% of all Forex trading volume occurs.
Economic data from Australia, New Zealand, China and Japan are released early in the session, and this could provide an excellent opportunity to trade news events.
The Tokyo session’s moves could set the tone for the rest of the day, and traders in later sessions often evaluate what strategies to take in other sessions
London session
London’s strategic location benefits from its time zone, as its morning overlaps with late trading in Asia, and its afternoon overlaps with New York City. 43% of all Forex transactions happen in London.
The London session is also known as the “European” trading session. Other major financial centres such as Geneva, Frankfurt, Zurich, Luxembourg, Paris, Hamburg, Edinburgh, and Amsterdam are also open during this time.
Most trends begin during the London session and continue until the beginning of the New York session.
Due to the high volume of transactions, the London session is typically the most volatile, making almost any pair tradable. However, sticking to the major pairs (EUR/USD, GBP/USD, USD/JPY, and USD/CHF) is generally best due to their tight spreads.
source: investopedia.com
New York Session
The US session begins at 8:00 am EST (12:00 pm GMT). New York is responsible for about 17% of all Forex transactions.
This session is also referred to as the “North American” trading session, as major financial centres like New York, Toronto and Chicago in North America are open at the same time.
Economic reports are usually released at the start of the New York session, with 85% of all trades involving the dollar. Hence, significant US economic data releases can move the market.
During the US and European markets’ simultaneous opening, abundant liquidity allows traders to virtually trade any pair. During the afternoon US session, volatility and liquidity tend to drop when European markets close.
According to the analytical reports, the most favourable trading time is around 10 am and 3 pm London time (10 am NY time) when there is optimal liquidity. This is the busiest time of day when traders from London and New York engage in trading, and it can be affected by news reports from the US, Canada, and Europe.
Additionally, this is the time when the WM/Refinitiv Spot Benchmark Rate is set, also known as the “London fix”. Banks and financial institutions use it as a reference point for daily currency exchange rates. For traders, there may be a surge in market activity before the fixing time that abruptly disappears exactly at the fixing time.
In general, it is recommended to trade in the middle of the week when the most action occurs. Fridays are generally busy until 04:00 pm GMT, and then the market becomes quiet until it closes at 9:00 pm GMT.
Summary:
Forex trading operates 24 hours a day, Monday to Friday.
The Forex market is divided into four major trading sessions: Sydney, Tokyo, London, and New York.
The market overlaps during different sessions, which are often the most active times in Forex trading.
The traditional “Forex 3-session system” includes the Asian, European, and North American sessions.
Tokyo session starts at 12:00 am GMT and accounts for around 20% of all Forex trading volume.
London session accounts for 43% of all Forex transactions and is typically the most volatile.
New York session is responsible for about 17% of all Forex transactions and is affected by significant US economic data releases.
The best trading time of day is around 10 am and 3 pm London time when traders from London and New York engage in trading, and it can be affected by news reports from the US, Canada, and Europe.
In general, it is recommended to trade in the middle of the week when the most action occurs.
US stock futures remained relatively stable on Thursday night, with the Dow Jones Industrial Average futures up 0.08%, while the S&P 500 and Nasdaq 100 futures increased by 0.12%. Elon Musk announced he would be stepping down as the CEO of Twitter, with Tesla’s shares increasing following the news.
On Thursday, the Dow Jones Industrial Average fell by over 200 points, or 0.66%, resulting in its fourth consecutive losing session. The decline was attributed to various factors, including Disney’s poor subscriber numbers and stress in the regional banking sector after PacWest Bancorp reported a drop in deposits. Investors remain concerned about a potential market downturn, despite weaker-than-expected wholesale prices data indicating easing inflation.
Investors are now waiting for preliminary consumer sentiment data and April import prices data, set to release on Friday. The Dow and S&P 500 are heading towards their second negative week in a row, while the Nasdaq Composite is on track for its third straight positive week.
Data by Bloomberg
On Thursday, the overall market experienced a slight decline of 0.17%. However, there were some sectors that performed well. Communication Services showed a positive growth of 1.65%, followed by Consumer Discretionary with a gain of 0.55% and Consumer Staples with a modest increase of 0.31%. On the other hand, several sectors saw decreases in their values. Financials declined by 0.20%, Health Care dropped by 0.34%, and Information Technology experienced a decrease of 0.45%. Industrials, Materials, Real Estate, Utilities, and Energy sectors all had larger declines, ranging from -0.65% to -1.24%.
Major Pair Movement
On Thursday, the trading market saw an increase in demand for the safe-haven currencies such as the US dollar and yen, as investors’ concerns over excess demand and inflation following pandemic reopenings faded. The yields of 10-year Treasuries declined by 4bp, due to several quarters of central bank tightening and yield curve inversion, which increased recession fears and reduced financial risk-taking. Moreover, there was an increase in demand for relatively high-yielding Treasuries and a decrease in regional banks’ pressure.
The Euro fell by 0.6%, and Sterling fell nearly 1% after the Bank of England (BoE) raised interest rates to 4.5%. However, this increase was oddly paired with higher than the previous inflation and growth forecasts, indicating the potential for a future slowdown. UK inflation remains above 10%, which is more than twice the new BoE projection. High beta and commodity-linked currencies experienced a decline due to the dollar’s risk-on rise and China demand doubts. Key risks ahead include US retail sales on Tuesday, as well as banks and the debt ceiling.
Technical Analysis
EUR/USD (4 Hours)
EUR/USD Drops to One-Month Low Amid Stronger US Dollar and Deteriorating Market Sentimen
The EUR/USD pair is heading towards its lowest daily close in a month due to a stronger US Dollar and worsening market sentiment. The pair has retreated from near 1.1100 and briefly dipped below 1.0900. The European Central Bank (ECB) Vice President, Luis de Guindos, expressed concerns about service and core inflation but did not provide any commitment on rates, while Joachim Nagel mentioned that decisions would be made on a meeting-by-meeting basis. Risk aversion benefited the US Dollar, and government bond yields rebounded during the American session.
US data indicated a slowdown in inflation and an increase in the labor market, with Initial Jobless Claims reaching the highest level since October 2021. Market sentiment will continue to be the main driver, and if concerns persist, the EUR/USD pair may experience further losses, contributing to increased volatility.
According to technical analysis, the EUR/USD pair is currently trending lower after reached the lower band of the Bollinger band. It is expected that the EUR/USD will continue to move lower and push the lower band. The Relative Strength Index (RSI) is presently at 37, suggesting a lower trend in the EUR/USD market.
Resistance: 1.0950, 1.0986
Support: 1.0911, 1.0881
XAU/USD (4 Hours)
Gold (XAU/USD)Prices Plunge on Surge in US Dollar and Market Sell-Off Amidst Banking Issues and US Debt Ceiling Concerns
Gold (XAU/USD)prices experienced a sharp decline on Thursday, hitting a new weekly low of $2,011.09, due to a surge in the US dollar amid a persistent dismal mood, resulting in a sell-off in the stock markets. The mood was impacted by banking issues, as the FDIC proposed extra fees for large banks to cover the $16 billion lost on the rescue of Silicon Valley Bank and Signature Bank in March. Furthermore, concerns around the US debt ceiling continued to undermine the sentiment, as Republican lawmakers are reluctant to back President Joe Biden’s plan. Additionally, government bond yields remain depressed, with the 10-year Treasury note yields at 3.38%, down 5 basis points, and the 2-year note offers at 3.86%, shedding 3 bps, due to the easing of inflation-related figures in April, as the PPI increased by 2.3% YoY.
The technical analysis indicates that XAU/USD is moving lower on Thursday. The price is currently pushing the lower band of the Bollinger Band, indicating the potential for a slight lower movement for XAU/USD. Moreover, the Relative Strength Index (RSI) is currently at 38, indicating that XAU/USD is considered in bearish trend.
There are several ways to trade Forex, and each method has its own advantages and disadvantages.
The most popular financial instruments used in Forex trading include retail Forex, spot FX, currency futures, currency options, currency exchange-traded funds (or ETFs), Forex CFDs, and Forex spread betting.
Retail Forex is a way for individuals to participate in the Forex market through Forex trading providers or brokers. These brokers trade on behalf of the retail traders in the primary OTC market by finding the best prices and adding a markup before displaying them on their trading platforms. Retail Forex trading involves trading contracts to deliver underlying currency rather than the currency itself.
Retail Forex trading is leveraged, meaning traders can control large amounts of currency with a small initial required margin. For example, with $2,000, traders can open a position valued at $100,000. However, this also means that traders can potentially lose more than their initial investment.
To avoid the physical delivery of currency, retail Forex brokers automatically “roll” client positions by entering into an equal but opposite transaction. This rolling process is known as Tomorrow-Next or “Tom-Next” and results in either interest being paid or earned by the trader, known as a swap or rollover fee.
Retail Forex trading is considered speculative, as traders are trying to profit from the movement of exchange rates without taking physical possession of the currencies they buy or sell. It is important for traders to understand the risks involved and to have a solid understanding of the market before participating in retail Forex trading.
Spot FX is an OTC market where customers trade directly with a counterparty. Unlike centralised markets, spot FX contracts are private agreements between two parties, and most trading is done through electronic trading networks or by telephone.
The primary market for FX is the interdealer market, which is dominated by banks and accessible only to institutions that trade in large quantities.
In the spot FX market, traders buy or sell contracts to make or take delivery of a currency at the current exchange rate. The price of currencies in the spot market is determined by several factors, such as current interest rates, economic performance, geopolitical sentiment, and price speculation.
The finalisation of a deal in the spot market is known as a spot deal, which is a bilateral transaction between two parties. A position in the spot market is settled in cash, but it takes two business days for the actual transaction to be settled.
Although the spot FX market operates 24 hours a day, it is not where retail traders trade.
Currency futures are contracts that allow traders to buy or sell a certain amount of currency at a set price and date in the future.
The contracts have standard details, such as the amount of currency, the date when the trade will happen, and the smallest price change allowed. The exchange makes sure that both sides of the trade are settled. Traders can buy or sell currency futures based on a fixed size and date at commodities markets.
The market is well-regulated, and you can easily get information about prices and trades. Currency futures are used by traders to protect against currency value changes or to predict future changes.
Currency options are financial agreements that give the holder the right, but not the obligation, to buy or sell a specific amount of currency at a fixed exchange rate or before a future date.
These options are available for trading on popular exchanges such as the Chicago Mercantile Exchange (CME), the International Securities Exchange (ISE), and the Philadelphia Stock Exchange (PHLX).
In general, currency options are commonly used to protect against unfavourable changes in exchange rates by corporations, individuals, and financial institutions. At the same time, traders can use currency options to speculate on currency movements.
Currency ETFs are managed investments in one or multiple currencies. They are created and managed by a financial institution and traded like a stock.
Currency ETFs serve various purposes: speculation, diversification, and hedging. But they come with macroeconomic risks like geopolitical risks and interest rate hikes.
Despite the limitations of trading, currency ETFs offer a convenient way to invest in the Forex market without the burden of managing investments.
Forex CFDs, also known as Contracts for Difference, are financial instruments that allow traders to speculate on whether the price of an underlying asset, like a currency pair, will rise or fall. When a trader enters into a CFD contract, they agree with a provider to exchange the difference in the value of the asset between the opening and closing of the trade.
Unlike traditional investments, CFD investors don’t actually own the underlying asset; instead, they receive revenue based on the price change of that asset.
The advantages of trading Forex CFDs include access to the underlying asset at a lower cost than buying it outright, ease of execution, and the ability to take both long and short positions.
source: babypips.com
Forex spread betting is a way to predict if a currency’s price will go up or down in the future without owning it. The price is based on the currency’s value in the FX market.
Spread betting providers allow this type of trading and consider three factors: the trade direction, the bet size, and the spread of the instrument traded.
One benefit of forex spread betting is that traders can use leverage to potentially make a larger profit from a smaller investment. However, if the market moves against you, you could lose more than your initial investment.
Each of these trading methods has its advantages and disadvantages, and traders should choose the method that best suits their trading style and risk tolerance.
Summary
Forex trading has several methods, including retail Forex, spot FX, currency futures, currency options, currency ETFs, Forex CFDs, and Forex spread betting.
Retail Forex is for individuals to participate in the Forex market through brokers who trade on behalf of retail traders.
Spot FX is an OTC market where customers trade directly with a counterparty.
Currency futures are contracts that allow traders to buy or sell a specific currency at a future date and a fixed price.
Currency options are financial agreements that give the holder the right, but not the obligation, to buy or sell a specific amount of currency at a fixed exchange rate or before a future date.
Currency ETFs are managed investments in one or multiple currencies.
Forex CFDs allow traders to speculate on whether the price of an underlying asset, like a currency pair, will rise or fall.
Forex spread betting is a form of betting where the trader bets on the movement of a currency pair.
When we want to talk about different types of currencies, we use three-letter symbols to represent them. The first two letters in the symbol tell us which country the currency comes from, and the third letter tells us the name of the currency. For example, USD stands for United States Dollar. These codes are called ISO 4217 Currency Codes.
The most actively traded currencies are the US Dollar (USD), Euro (EUR), Japanese Yen (JPY), British Pound (GBP), Australian Dollar (AUD), Swiss Franc (CHF), Canadian Dollar (CAD), and New Zealand Dollar (NZD). These currencies are often referred to as the “majors” and are traded in high volumes due to their liquidity and stability.
source: statista.com
The US Dollar plays a central role in the Forex market, with over 50% of the trades involving it.
The US Dollar is crucial in the global economy for several reasons. Firstly, it has the largest economy and most liquid financial markets globally, making it a powerhouse for international trade. Secondly, it is the primary global reserve currency and is used in half of all international loans and bonds and in cross-border transactions, including petrodollars. Lastly, the US’s stable political system and sole military superpower status make it a safe haven for investors.
It is important to understand that currencies are always traded in pairs. A currency pair is the exchange rate between two different currencies. For example, the EUR/USD currency pair represents the exchange rate between the Euro and the US Dollar.
There are three main categories of currency pairs: the “majors”, the “crosses”, and the “exotics”. The popularity of currency pairs can vary depending on market conditions, so it’s important for traders to stay informed about which pairs are currently in demand.
While there are eight major currencies, only seven major currency pairs exist. That is because US Dollar must always be present in the pair. This currency group involve EUR/USD, USD/JPY, GBP/USD, USD/CHF, USD/CAD, AUD/USD, and NZD/USD. The last three pairs are also called commodity currency pairs. The “majors” are usually the easiest for beginners to trade.
The “crosses” are currency pairs that do not involve the US Dollar. Cross-currency pairs consist of two major currencies: the Euro and the Japanese Yen (EUR/JPY) or the British Pound and the Japanese Yen (GBP/JPY). Crosses are typically less liquid than the majors, but they can still provide opportunities for profitable trades.
The “exotics” are currency pairs that involve a major currency paired with a currency from an emerging or developing country. Exotic currency pairs are considered more volatile and less liquid than the majors and crosses. Examples of exotic pairs include the USD/MXN (US Dollar/Mexican Peso) and the USD/ZAR (US Dollar/South African Rand).
Understanding currency pairs is crucial for forex trading because buying one currency means simultaneously selling another. For example, if you buy the EUR/USD currency pair, you are essentially buying Euros and selling US Dollars. Trading currency pairs allows traders to speculate on the exchange rate between two currencies and potentially profit from the difference in price.
Forex speculation is the practice of buying and selling currency pairs in order to profit from the fluctuations in their exchange rates. Speculators aim to buy currencies when they are undervalued and sell them when they are overvalued, making a profit on the difference in the exchange rate.
Exchange rates are the values at which one currency can be exchanged for another. These rates are determined by the supply and demand of each currency in the market. When demand for a currency is high, its value increases, and when demand is low, its value decreases. Exchange rates are expressed as a ratio, such as 1.20 EUR/USD, which means that one euro is worth 1.20 US dollars.
There are several factors that can affect exchange rates, including:
Economic Factors: The state of a country’s economy can have a significant impact on its currency’s value. Factors such as inflation, interest rates, and economic growth can all affect exchange rates.
Political Factors: Political stability and government policies can also affect exchange rates. For example, a country with a stable government and sound economic policies may have a stronger currency than a country with political turmoil and uncertain economic policies.
Market Sentiment: The mood of the market can also influence exchange rates. If traders are optimistic about a currency’s prospects, its value may increase, while pessimistic sentiment can lead to a decline in value.
source: Bloomberg.com
Brexit is a prime example of how political events impact a nation’s currency exchange rate. The UK’s decision to leave the EU in 2016 resulted in uncertainty and instability, leading to a decline in the value of the British pound. Before the referendum, the pound traded at 1.50 USD, but after the decision, it fell to 1.30 USD. Prolonged negotiations between the UK and the EU added to the volatility, further weakening the pound against other currencies.
Understanding these basics of Forex trading is essential for anyone looking to enter the market. VT Markets provides its clients with Daily market analysis to keep them up to date with the latest news and help make informed decisions about their investments.
Summary:
Forex trading involves buying and selling currencies in pairs, with three main categories of currency pairs: majors, crosses, and exotics.
The most actively traded currencies are the US Dollar, Euro, Japanese Yen, British Pound, Australian Dollar, Swiss Franc, Canadian Dollar, and New Zealand Dollar.
Forex speculation means buying and selling currency pairs to profit from fluctuations in their exchange rates.
Exchange rates are determined by supply and demand, with factors such as economic and political stability and market sentiment affecting exchange rates.
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