US stocks advanced higher on Friday, witnessing impressive daily gains and preserving its bullish momentum amid the risk-on market sentiment. The markets seem to have priced in a supersized 75 bps rate hike at the September FOMC meeting as the bets for an aggressive monetary tightening were reaffirmed by Fed Chair Jerome Powell, who said on Thursday that the Fed needs to keep going until it brings the inflation down. Looking ahead, markets will be focused on the August consumer-price index that will release this Thursday, which is seen as one of the key reports before the Fed rate decision on September 20-21. In the Eurozone, the hawkish comments from ECB officials provided a boost to the euro, as ECB policymakers Peter Kazimir and Klaas Knot said that their priority was policy normalization and added that they had no other option than to continue with resolute rate hikes. The ECB’s 75 bps rate hike announcement has also trimmed the Fed-ECB policy divergence.

The benchmarks, S&P 500 and Dow Jones Industrial Average both gained positive traction on Friday as the S&P 500 topped its 100-day average and snapped a three-week losing streak. The S&P 500 was up 1.5% on a daily basis and the Dow Jones Industrial Average also advanced with a 1.2% gain for the day. All eleven sectors in S&P 500 stayed in positive territory as the Communication Services and the Energy sectors are the best performing among all groups, rising 2.53% and 2.38%, respectively. The Nasdaq 100 climbed the most with a 2.2% gain on Friday, and the MSCI World index was up 1.7% for the day.

Main Pairs Movement

The US dollar suffered daily losses on Friday, coming under heavy selling pressure and retreating further from a two-decade high near the 110 mark amid the risk-on impulse across the board. However, the aggressive Fed rate hike bets and elevated US Treasury bond yields should help limit any meaningful US dollar corrective slide. The market focus now shifts to US CPI data as a consecutive decline in the headline report will confirm that the inflationary pressures are responding inversely to the higher interest rates by the Fed.

GBP/USD surged on Friday with a 0.75% gain as the cable caught aggressive bids and climbed to a near two-week high amid the broad-based US dollar weakness. On the UK front, the new UK Prime Minister Liz Truss’s plans to cap energy bills for the next two years continued to provide support to the cable. Meanwhile, EUR/USD also advanced sharply and touched a daily high above the 1.010 mark in the early European session. The pair was up almost 0.50% for the day.

Gold advanced higher with a 0.50% gain for the day after touching a daily high above the $1,728 mark during the European session, as the falling US dollar helped the safe-haven metal to find demand. Meanwhile, WTI Oil staged a goodish rebound and refreshed its daily top above the $87 mark during the US trading session, as Russia’s threat to cut oil flows has raised concerns about tight global supply.

Technical Analysis

EURUSD (4-Hour Chart)

EURUSD surged during the early trading of the Asia trading session. ECB president Christine Lagarde’s remarks on Friday provided some comfort for Euro bulls after the substantive ECB 75 basis point interest rate hike. President Lagarde pointed out that quantitative tightening would not be a norm moving forward; furthermore, the ECB’s stance remains focused on policy normalization. The weaker U.S. Greenback on Friday allowed Euro bulls to bid EURUSD above parity in more than three straight trading sessions. On the economic docket, the U.S. will release CPI and PPI figures on Tuesday and Wednesday. EU CPI data is scheduled to be released on the 16^th.

On the technical side, EURUSD broke above our previously estimated resistance level at 1.0011, but we project this level to hold for the near future. The support level remains at 0.9902. RSI for the pair sits at 49, as of writing. On the four-hour chart, EURUSD currently trades below its 50, 100, and 200-day SMA.

Resistance:  0.9902, 1.0011, 1.0055

Support: 0.9902, 0.985

GBPUSD (4-Hour Chart)

Cable advanced strongly during the early trading hours of the Asia trading session. GBPUSD was able to cling to daily gains as the American trading session. U.K.’s new Prime Minister Liz Truss announced a two-year energy price guarantee that would put a ceiling on household energy bills. The bill is expected to cost British taxpayers more than 20 billion Pounds down the road. The weakened Dollar further allowed the Pound to advance. On the economic docket, the U.K. is set to release GDP figures and Manufacturing Production figures on the 12th, CPI data on the 14th, and the BoE is scheduled to announce interest rate decisions on the 15th; however, due to the passing of Queen Elizabeth II, Britain’s public sector could be affected and report dates could be postponed.

On the technical side, GBPUSD climbed to a weekly high of 1.164 during the European trading session but faced resistance soon. A new short-term support level for Cable sits at around the 1.15584 price level. Long-term support for GBPUSD sits at 1.1463. RSI for the pairs sits at 57.72, as of writing. On the four-hour chart, GBPUSD currently trades above its 50, 100, and 200-day SMA.

Resistance: 1.1561, 1.1854

Support: 1.1463

XAUUSD (4-Hour Chart)

The non-yielding yellow metal advanced slightly amid a weaker U.S. Greenback. After touching its two-decade high, the Dollar index retreated below the key 110 level. Short-term selling of the U.S. Greenback is not likely to become a pattern as the Fed remains hawkish and is willing to increase the pace of tightening. Expectations of a 75 basis point interest rate hike by the Fed during the next FOMC have increased significantly after the better-than-projected jobs released during the previous week. The 13th and 14th could be volatile for XAUUSD as the U.S. is set to release CPI and PPI figures, which are both critical indicators for the Fed’s rate hike considerations.

On the technical side, XAUUSD has touched our previously estimated resistance level at the $1,762 per ounce price level and began retreating. The short-term support level for the precious metal remains at $1,688 per ounce. RSI for the pair sits at 43.71, as of writing. On the four-hour chart, XAUUSD currently trades below its 50,100, and 200-day SMA.

Resistance: 1762, 1800

Support: 1688.129, 1695

Economic Data

This week, investors will be eyeing inflationary data from the US, UK and Australia. 

The US will release its Consumer Price Index (CPI), Producer Price Index, and Retail Sales data. The market will be watching closely after more neutral labour data were released last week and after the Fed raised interest rates by 0.25%. 

The UK will also release data on CPI, GDP. Australia will release its employment data.

Image source: forexfactory.com

UK Gross Domestic Product | 12 September 2022

Gross domestic product in the UK shrank 0.6% in June from the previous month, following a downwardly revised 0.4% rise in May, according to data released by the Office for National Statistics on 12 September. Economists polled by Bloomberg expected an unchanged reading for July.

US Consumer Price Index | 13 September 2022

In July, consumer prices in the United States held steady from June, following a 1.3% jump in the previous month, which was the most significant rise since January 1992. Analysts expect consumer prices to slow slightly in July, falling 0.1%.

UK Consumer Price Index | 14 September 2022

The annual inflation rate in the United Kingdom reached 10.1% in July of 2022, up from 9.4% in the previous month. Experts predict it will fall below 10% again by the end of the year.

US Producer Price Index | 14 September 2022

In July, US producer prices unexpectedly fell 0.5% month-on-month, following a downwardly revised 1% rise in June. The decline in producer prices was driven by lower costs for agricultural products and energy. Producer prices are forecast to increase by 0.1% for August, after increasing 0.2% in July.

New Zealand Gross Domestic Product | 15 September 2022 

New Zealand’s economy declined 0.2% in the March 2022 quarter, following a 3% rise in the previous period. Analysts expect the economy will improve by 1.5% for the second quarter.

Australian Employment Data | 15 September 2022

Australia’s job market unexpectedly declined in July by 40,900 to 13.56 million; the nation’s unemployment rate dropped to 3.4%, a new record low. We can expect employment to remain positive and the unemployment rate to hold steady in August.

US Retail Sales | 15 September 2022

Markets were disappointed by a 0.1% decrease in retail sales in the US in July 2022, but they expected a 0.2% increase this month.

In July 2022, retail sales unexpectedly stalled in the US, disappointing markets that expected a 0.1% increase. This month, economists expect a 0.2% increase in retail sales figures.

Jerome Powell, the chairman of the Federal Reserve, reaffirmed the bank’s commitment to combating price increases and remaining upbeat until inflation returns to the Fed’s 2 percent objective on Thursday. Following Powell’s reiteration of the necessity of combating high inflation, the stock market ended a choppy session with solid gains.

The Nasdaq increased by 0.6% and maintained a positive performance. The S&P 500 increased by 0.7%. The Dow Jones Industrial Average added 0.6%. Small caps held up slightly better than the other indexes, with the Russell 2000 index rising 0.8%.

Invesco QQQ Trust (QQQ), which tracks the Nasdaq 100, managed to gain 0.5% despite key Nasdaq companies including Apple (AAPL), Microsoft (MSFT), and Alphabet (GOOGL) trading lower.

Early data showed that NYSE volume increased by 4.1% and Nasdaq volume increased by 0.4%.

The price of crude oil increased by 0.9% to $82.66 per barrel. Natural gas continued to rise, up 1.5%.

Queen Elizabeth II, whose reign took Britain from the age of steam to the era of the smartphone, and who oversaw the largely peaceful breakup of an empire that once spanned the globe, has died. She was 96. She died peacefully at her estate in Balmoral, Scotland on the afternoon of Sept. 8, according to a statement from Buckingham Palace.

Ascending the throne in 1952, Elizabeth led the UK through a time of political upheaval. She began her reign as head of an empire, albeit one in decline. By the time of her death, the future of the UK itself was in doubt, with recurrent calls for independence in Scotland and Britain’s exit from the European Union leading to renewed tension in Northern Ireland. Her eldest son, Prince Charles, was heir to the throne.

Main Pairs Movement

After a turbulent day, the dollar ended the day in a mixed state across the FX board. The European Central Bank increased rates by 75 basis points as anticipated, leaving the EUR/USD pair little altered and close to parity.

The Canadian dollar surged against the greenback, with the pair trading at around 1.3090 as BOC officials reiterated more rate hikes are on the docket as inflation remains stubbornly high. The Australian dollar extended its decline against its American rival on Wednesday, with AUD/USD falling to 0.6698 before recovering, now ending the day near a daily high of 0.6750.

While the USD/JPY pair is stable at about 144.00, the USD/CHF pair fell and is currently trading at roughly 0.9700. While crude oil prices saw minor gains, with WTI closing the day at $83.25 a barrel, gold prices posted losses for the day, ending at about $1,708 a troy ounce.

US Treasury yields increased somewhat for the day’s conclusion. The yield on the 10-year note is at 3.29%, which is almost high enough to spark demand for the dollar.

Technical Analysis

EURUSD (4-Hour Chart)

EURUSD experienced a new packed trading day. The ECB hiked interest rates by 75 basis points, in line with market expectations. However, the ECB also upwardly revised inflation projections for 2022, 2023, and 2024. The interest rate hike allowed EURUSD to trade above parity. During the American trading session, the U.S. initial jobless claims reports came in better than expected, thus sending Dollar demand to new heights as market participants added on bets of a 75 basis point interest rate hike by the Fed. During Fed chair Jerome Powell’s speech, he reinstated the Fed’s hawkish stance, which sent short-term treasury yields back above the 3.3% mark. Further upside for the Euro remains limited as the ECB struggles to keep inflation in check while stimulating positive economic growth amid multiple externalities weighing on the European economy

On the technical side, EURUSD has met a new resistance level at around the parity mark. Short-term support levels remain unchanged at the 0.9902 price level. RSI for the pair sits at 49.8, as of writing. On the four-hour chart, EURUSD currently trades below its 50, 100, and 200-day SMA.

Resistance:  0.9902, 1.0011, 1.0055

Support: 0.9902, 0.985

GBPUSD (4-Hour Chart)

Cable saw a surge in bidding during the start of the European trading session. Market participants tuned in to BoE’s chief economist Huw Pill, who noted that if the central bank observes tightening the central bank would be willing to slow down its pace of tightening. The surprised dovish tone from the BoE allowed the British Pound to gain traction; however, all gains by the Sterling would be erased at the start of the American trading session. The U.S. released better than expected initial jobless claims figures, which boosted the odds of a 75 basis point interest rate hike by the Fed. Stepping away from economics, Britain’s longest reigning monarch, Queen Elizabeth II passed away at the age of 96.

On the technical side, Cable has once again successfully defended our previously estimated support level of 1.1463; however, Cable has displayed a rather strong downward trend thus market participants should be aware of a break below 1.14. RSI for the pair sits at 42.44, as of writing. On the four-hour chart, Cable currently trades below its 50, 100, and 200-day SMA.

Resistance: 1.1561, 1.1854

Support: 1.1463

XAUUSD (4-Hour Chart)

Gold prices advanced during early trading on the 8^th, but the non-yielding yellow metal could not retain gains as the American trading session began. The rise in Gold prices, recently, has been entirely dependent on the weakness of the U.S. Greenback; however as better than expected initial jobless claim report was announced, bidding for the Dollar resumed and sent Gold lower towards the $1700 per ounce price level. With a new round of interest rate hikes just on the horizon, Gold prices remain pessimistic as market participants attempt to find any type of yield in other asset classes.

On the technical side, XAUUSD touched our previously estimated resistance level of $1,724 per ounce during the European trading session and soon entered a correction toward the $1,700 per ounce price level. The short-term support level remains at $1695.42 per ounce. RSI for the pair sits at 45.98, as of writing. On the four-hour chart, XAUUSD currently trades below its 50, 100, and 200-day SMA.

Resistance: 1762, 1800

Support: 1688.129, 1695

Economic Data

Dear Client,

Please be advised of the upcoming Palo Alto Networks Inc Prov (PANW) stock split that is going to take place as per the following schedule:

Ex-Date: September 14th, 2022. Common shares will trade at the new split-adjusted price.

Important implications of the PANW Stock Split:

1. The quantity of shares of each client’s position will multiply by 3.

2. Post-split, the “open price” and “take profit / stop loss” of each position will be adjusted, which will be the original price divided by 3.

3. Palto Alto Networks is expected to have a 3-for-1 stock split on the close of business of 13th September, 2022, and will begin trading on a split-adjusted basis on 14th September, 2022.The estimated post-split price may be 3/1 of the EOD price on 13th, September.

4. All pending orders at the time of the split (Buy Limit, Sell Limit, Buy Stop, Sell Stop, Buy Stop Limit, Sell Stop Limit) will be cancelled.

5. All PANW holding positions and pending orders on DEMO account will be closed as a result of the stock split.

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

You might want to know more about stock splits?

For more details on stock splits, please visit the following articles:
https://helpcentre.vtmarkets.com/hc/en-us/articles/8597160316697-What-is-stock-split-

If you’d like more information, please don’t hesitate to contact [email protected].

Dear Client,

Warmly reminds you that the component stocks in the stock index spot generate dividends. When dividends are distributed, VT Markets will make dividends and deductions for the clients who hold the trading products after the close of the day before the ex-dividend date.

Indices dividends will not be paid/charged as an inclusion along with the swap component. It will be executed separately through a balance statement directly to your trading account, the comment for which will be in the following format “Div & Product Name & Net Volume ”.

Please note the specific adjustments as follows:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact [email protected].

US stocks advanced higher on Wednesday, climbing the most in about a month as the global bond market selloff takes a break. The equity market witnessed fresh upside strength after the release of the minutes from the Federal Reserve (Fed) Beige Book, which showed that price growth has slowed in 9 of the 12 districts and also indicated that economic activity was unchanged but the outlook for future economic growth remained generally weak. Investors tend to wait for the September 13th inflation report as the economic momentum could only improve if inflation continues to soften.

In the Eurozone, the European Central Bank will announce its monetary policy decision on Thursday, which is widely anticipated to hike rates by 50 bps but the focus will be on whether European policymakers are willing to put growth behind taming inflation or not. Skyrocketing prices in the Eurozone are taking their toll on households and businesses and pushing high inflation up amid the European energy crisis.

The benchmarks, S&P 500 and Dow Jones Industrial Average both staged a goodish rebound on Wednesday as the improving market sentiment and the retreating US dollar provided support to the equity markets. The S&P 500 was up 1.8% on a daily basis and the Dow Jones Industrial Average also advanced with a 1.4% gain for the day. Ten out of eleven sectors stayed in positive territory as the Utilities and the Consumer Discretionary sectors are the best performings among all groups, rising 3.14% and 3.08%, respectively. The Nasdaq 100 meanwhile climbed the most with a 2.1% gain on Wednesday and the MSCI World index was up 1.1% for the day.

Main Pairs Movement

The US dollar suffered daily losses on Wednesday, failing to extend its previous rally and retreated towards the 109.5 area during the American session amid a slightly risk-on impulse across the board. The Fed Beige Book also reported that some firms see some easing in labour shortages and price pressures. As for now, Investors expect a hawkish commentary from Fed Powell on interest rates as price pressures are still high.

GBP/USD was little changed on Wednesday as the cable remained under pressure near March 2020 low amid the less-hawkish Bank of England. On the UK front, the BoE policymakers failed to reinforce bets for a 75 bps September rate hike during the Monetary Policy Report Hearings. Meanwhile, EUR/USD advanced sharply and extended the intra-day rally towards the 1.000 area ahead of the ECB’s rate decision. The pair was up almost 1.05% for the day.

Gold surged with a 0.95% gain for the day after touching a daily high above the $1,718 mark during the US trading session, as the yellow metal marked the biggest daily gains in over a week amid a pullback from the 20-year high witnessed in the US dollar. Meanwhile, WTI Oil continued to suffer heavy losses and refreshed its daily low below the $82 mark in the late US trading session, as the speculation about easing Chinese demand following tepid local data kept weighing on the oil price.

Technical Analysis

EURUSD (4-Hour Chart)

EURUSD enjoyed a surge in demand over the course of the previous trading day. The shared currency saw increased bidding as market participants await the ECB’s monetary policy decision, which is scheduled during the late European trading session of today. Markets are currently pricing in a 50 basis point interest rate hike by the ECB; however, interest rate hikes could pose further pressure on a deflating European economy. In addition to a slowing economy, Europe now faces further energy price instability as the Nordstream 1 pipeline halts its supplies. The initial jobless claims figure from the U.S. is also scheduled to be released during today’s American trading session.

On the technical side, EURUSD has successfully defended our previous estimated support level of 0.9902. The short-term bounce of the pair will meet its near-term resistance at around the 0.9983 price region. RSI for the pair sits at 52, as of writing. On the 4-hour chart, EURUSD currently trades below its 50, 100, and 200-day SMA.

Resistance:  0.9902, 1.0033, 1.0055

Support: 0.9902, 0.985

GBPUSD (4-Hour Chart)

Cable traded lower over the course of Wednesday’s trading. The British Pound met strong selling pressure at the start of the Asia trading session. Remarks from members of the BoE further added to the selling pressure. BoE policymakers are still debating whether a further interest rate hike is necessary and some are arguing for a more gradual rate hike in order to prevent over-tightening as the British economy continues to falter. The strong U.S. Greenback further limits any upward movement for the British Pound. Market participants will now turn their attention to the U.S. initial jobless claims figure, scheduled to be released during today’s American trading session. A worse-than-expected initial jobless claims figure could ease bets of a 75 basis point interest rate hike by the Fed and allow the British Pound some breathing room.

On the technical side, GBPUSD has touched our previously estimated support level of 1.1463 and is currently trading around that price region. The next level of support for Cable sits at around the 1.13 price region. RSI for Cable sits at 41, as of writing. On the four-hour chart, GBPUSD currently trades below its 50, 100, and 200-day SMA.

Resistance: 1.1561, 1.1854

Support: 1.1463

XAUUSD (4-Hour Chart)

Gold traded higher over the course of Wednesday’s trading. The non-yielding metal took advantage of a weaker Dollar and was able to find footing above the $1700 per ounce price level. The U.S. Greenback saw a broad-based sell-off as short-term treasury yields retreated below 3.3%. However, as the next FOMC nears, market participants should be aware that the Dollar-denominated and non-yielding metal could see further price depreciation. Furthermore, with the ECB slated to increase interest rates by 50 basis points, demand for the yellow metal is expected to fall even further. A return to normalcy could be on the horizon as breakthroughs in antibody research against COVID-19 have been announced by Duke University. A reverse in risk sentiment could send Gold below the $1650 price level.

On the technical side, XAUUSD has rebounded from our previously estimated support level of $1695 per ounce and is trending toward our estimated short-term resistance level of $1724 per ounce. RSI for XAUUSD sits at 51.7, as of writing. On the four-hour chart, XAUUSD currently trades below its 50, 100, and 200-day SMA.

Resistance: 1762, 1800

Support: 1688.129, 1695

Economic Data

US stocks edged lower on Tuesday, seesawing between gains and losses along the session but gave up ahead of the close amid the bets that the Federal Reserve will stay hawkish on policy tightening. On top of that, recession fears still remained amid the escalating energy crisis, but UK Prime Minister Liz Truss has announced energy bail-outs to cope with the crisis that affects all of Europe. On the economic data side, the US ISM Services PMI improved to 56.9 in August, which came higher than the market’s expectations and showed a slight uptick in the services sector due to increases in business activity. In the Eurozone, the conflict with Russia, which cut all gas provision to Europe, acted as a headwind for the euro and exerted bearish pressure on the market sentiment.

The benchmarks, S&P 500 and Dow Jones Industrial Average both suffered slight losses on Tuesday as the recession fears and the hawkish Fed expectations continued to weigh on the equity markets. The S&P 500 was down 0.4% on a daily basis and the Dow Jones Industrial Average also dropped with a 0.5% loss for the day. Seven out of eleven sectors stayed in negative territory as the Communication Services and the Energy sectors are the worst performing among all groups, losing 1.26% and 1.08%, respectively. The Nasdaq 100 fell the most with a 0.7% loss on Tuesday and the MSCI World index was down 0.5% for the day.

Main Pairs Movement

The US dollar advanced higher on Tuesday, preserving its upside traction amid upbeat US ISM Services PMI data. The DXY index was surrounded by bullish momentum for most of the day and touched a daily top near 110.5 level, but then retreated back slightly to erase some daily gains. A surprising improvement in the Services PMI helped the safe-haven greenback to find demand, which printed a fresh two-decade high at 110.55. Investors now waiting for the speech from Fed Chair Jerome Powell scheduled on Thursday.

GBP/USD is little changed on Tuesday as the market focus shifts to speeches from central banks. On the UK front, after securing the position of next UK Prime Minister, Liz Truss is continuously announcing relief packages for households against soaring inflation after securing the position of next UK Prime Minister. The GBP/USD pair climbed to a daily high above the 1.160 mark, but failed to preserve its upside traction and surrendered its early gains. Meanwhile, EUR/USD remained under bearish pressure and extended the slide towards 0.988 amid the escalating energy crisis. The pair was down almost 0.23% for the day.

Gold declined with a 0.50% loss for the day after dropping to a daily low near the $1700 mark during the US trading session, as the stronger US dollar across the board and upbeat US PMI data both dragged the precious metal lower. Meanwhile, WTI oil came under selling pressure and retreated to the $86 area during the second half of the day, as markets worried that high inflation and interest rate hikes will hit oil demand.

Technical Analysis

EURUSD (4-Hour Chart)

EURUSD saw large price movements as economic data from the U.S. and the E.U. were released. The shared currency enjoyed demand early in the trading day, but EURUSD could not hold on to gains as Germany published its July Factory orders, falling by 1.1% month over month and 13.6% year over year. The dismay economic data from Germany was exacerbated by the upbeat PMI data, which was released at the opening of the American trading session. The two key economic data sent EURUSD below the 0.99 level. The worse than expected Germany factory orders figure adds further concern to the E.U.’s economic outlook.

On the technical side, EURUSD has successfully defended our previous estimated support level of 0.9902; however, we do expect EURUSD to travel further lower to the 0.98 price region in the near future. RSI for the pair sits at 42.1, as of writing. On the four-hour chart, EURUSD currently trades below its 50, 100, and 200-day SMA.

Resistance:  1.0033, 1.0055, 1.0082

Support: 0.9902, 0.985

GBPUSD (4-Hour Chart)

GBPUSD enjoyed early gains during the Asia trading session, as market participants embrace a new British Prime Minister. Prime Minister Liz Truss has promised to deal with the energy crisis and intends to cut taxes in order to grow the slowing economy. However, Cable lost ground as soon as the better-than-expected PMI figure was released during the American trading session. Market participants will now turn their attention to the BoE’s statement, scheduled during today’s European trading session. Despite Cable’s retreat, the British Pound has outperformed its G10 peers against the American Greenback.

On the technical side, we remain confident that the 1.1463 price level will support Cable in the short term. The short-term resistance level remains around the 1.1561 price region. RSI for Cable sits at 44.787, as of writing. On the four-hour chart, GBPUSD currently trades below its 5, 100, and 200-day SMA.

Resistance: 1.1561, 1.1854

Support: 1.1463

XAUUSD (4-Hour Chart)

After seeing a rise in Gold prices over the course of Monday’s trading, Gold has once again resumed its downward trend. The U.S. Greenback continues to be more attractive compared to the non-yielding precious metal. After the release of the U.S. non-manufacturing PMI, Gold entered a downwards spiral towards the $1700 per ounce price region. The rise in U.S. 10-year treasury yields has further added selling pressure on the yellow metal. The energy crisis and the price surge it accompanies have pulled market participants away from XAUUSD.

On the technical side, XAUUSD hit our previously estimated resistance level of $1724 per ounce and began retracing toward our estimated support level of around $1695 per ounce. RSI for Gold sits at 40.84, as of writing. On the four-hour chart, XAUUSD currently trades below its 50, 100, and 200-day SMA.

Resistance: 1762, 1800

Support: 1688, 1695

Economic Data

Understanding leverage trading

What is leverage in forex? Leverage trading is a way to increase your exposure to market forces when you deal in foreign currency pairs. The forex market works according to laws of risk and reward — the greater the risk, the greater the potential reward. Therefore, the higher the leverage rate, the higher the potential return. However, this also increases the potential loss.

When you leverage a forex trade, you essentially borrow capital to supplement your money. Forex currency pairs move in pips — pips in forex are minimal price movements, so un-leveraged positions can only result in small profits and losses. By borrowing additional capital for leverage, you increase how much each pip movement is worth.

For example, if you trade with a leverage of 1:10, you are borrowing $10 for every $1 you put forward, and each pip is worth 10x the amount it would be without leverage. You will still need to pay this $10 back once you close your trade, which will be taken out of the profits of a successful position. You’ll need to pay this amount back if your position fails. This is why traders must be cautious and ensure they take the time to learn forex techniques before extending the leverage on their positions.

Calculating the leverage ratio

Leverage is generally represented as a ratio — for example, 1:10. The number on the left of the ratio represents the money you will put forward from your capital. In contrast, the number on the right represents the proportion you will borrow. With a 1:10 trade, you can use $100 of your own money to control a position of $1,000. With a 1:100 trade, this $100 will allow you to control a position with $10,000.

It’s important not to get carried away with leverage trading. Stick to your strategy, and only choose a leverage ratio you feel comfortable with. Don’t be tempted to push the boundaries, and stick to manageable levels of risk.

How to trade with leverage

The key benefit of forex leveraging is the profit potential, but you need a strong strategy if you are to stand a chance of realising this potential. This means understanding your risk tolerance and how much you are willing to borrow on your trade. Next, you’ll need to select a currency pair that best suits your strategy and choose a leverage ratio that aligns with your targets. Once these preliminary steps are complete, you can start to trade with leverage.

• Put protective measures in place

Before opening your forex position, you need to have some protective measures. These tools will help you maintain a sustainable approach to trading and ensure that your position remains within strict parameters. The main tools you will use take profit and stop loss, and you may use these with other forex trading techniques such as FX futures. 

• Take profit

Take profit will automatically close the trade once a certain profit level is reached. With forex trading, mainly leverage trading, you are not simply trying to achieve the maximum level of return from each position. Instead, you want to ensure that your profits remain within your broader strategy. This tool helps ensure your profits don’t reach unsustainable levels and you stay on track for long-term growth.

• Stop loss

Stop loss works the same way as taking profit but in the opposite direction. This tool enables you to set a loss limit. If your position struggles and falls to this limit, it will automatically be closed, and you will absorb the losses. The tool ensures that losses do not become unmanageable and helps you keep within the initial strategy’s limits.

• Open your position

Once you have chosen your leverage ratio and set your take profit and stop loss tools, you can open your position based on the current spot trading price. Open a buying position if you believe the currency pair’s value will increase, or open a selling position if you think it will fall in value. You should have a strategy for how long you expect to keep the position open.

• Close your position

When you reach your predetermined endpoint for the position, you can close it. This means the position is no longer exposed to market forces, and you will take any profits and absorb any losses incurred while it remains open. You now need to pay back the capital you leveraged on the position, whether you made a profit or not.

Begin your forex trading journey at VT Markets — trade FX forwards and other derivatives

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FAQs

What is a good leverage in forex?

It’s difficult to say what is a good level of leverage in forex simply because this is a personal choice for individual traders. A good rule of thumb for traders is to start small and work exclusively with manageable leverage levels. While increasing your leverage allows you to achieve greater profits, it also increases your exposure to risks and losses.

If you are new to trading with leverage, you should use 10:1 leverage as an absolute maximum. This means you put $1 of your capital forward and use leverage to borrow $10. Consider using lower leverage when you are starting or unsure, but never exceed this level.

What is 1 to 500 leverage?

1 to 500, commonly represented as 500:1, is a very high leverage ratio. In this example, you borrow $500 for every $1 you put forward from your capital reserves. While this is great if your trade is successful, as you are essentially multiplying your profits by 500, it exposes you to a very high level of risk. Even if you opened trade with only $10, you would need to borrow $5,000 to use as leverage, and this $5,000 will need to be paid back whether the trade is successful or not. This means if your trade fails, you could find yourself in a significant amount of debt.

This rate of 1 to 500 is typically the maximum level of forex leverage traders are permitted to use. Most traders will not open positions with this sort of leverage.

Can I use leverage in forex as a beginner?

Anyone can use leverage when they trade forex. However, it’s essential to understand that forex significantly increases your trade risk. As noted above, beginner traders should keep their rate of leverage low and manageable, limiting their exposure while they get used to this trading technique.

Using a demo account is even better for beginners wondering how to trade forex with leverage. With a demo account, you can practice using leverage just like an actual trade, except there is no risk because you are neither putting forward any money nor borrowing any. You can’t make a profit from a demo account, but you can learn valuable techniques that will help you further down the line.

Is it possible to trade forex without leverage?

Yes, it is possible to trade forex without leverage. You can put forward your own money without borrowing or leveraging any additional capital. This reduces your risk exposure but also reduces your exposure to profits. Traders who do not use leverage will have to make massive amounts of successful trades or put forward a high level of capital before they start to make significant profits.

With this in mind, most traders use little leverage when they trade. As they get more accustomed to using this, they can gradually increase their risk profile to increase profit potential. Of course, there are no guarantees, and even experienced traders can lose money when leveraging. Other forex strategies, such as OTC derivatives like FX forwards, do not always require leverage, although traders do have the choice of opening a structured leveraged forward contract.

How do I reduce risk when trading forex with leverage?

It is possible to manage and reduce risk while leverage trading. The most effective way to reduce risk is to keep the leverage ratio low. If you are leveraging at 5:1, you stand to lose considerably less money on a failed position than if you were leveraging at 20:1. Traders are always looking for the sweet spot of optimal risk exposure without trading in an irresponsible and unsustainable fashion.

Another way to reduce risk is to grow your experience slowly over time. Get used to trading on a demo account and then practice leverage trading with live positions, using small amounts of leverage at first as you develop your understanding. This helps to foster a sustainable approach to this trading strategy.

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Understanding pips in forex

Pips in forex are the incremental price movements of currency pairs on the foreign exchange market. The term is an acronym for “price in percentage” or “percentage interest point”. When the price of a currency pair moves up or down, the extent of this movement is measured in pips, which are represented on the interface of your trading platform dashboard.

One pip is generally a tiny amount and worth far less than a single dollar and even less than a single cent. Despite this relatively small scale, pips are very important to traders — traders are working with such acceptable margins that they must remain aware of even the most minute price movements. These movements are instrumental as traders plan their strategies and examine their open positions.

Different definitions of trading pips

Trading pips can be defined in different ways. This is because the idea provides a valuable metric for traders examining the movements of the currency pairs. For currencies with tiny denominations, a pip may be defined differently to currencies with larger denominations.

For most currency pairs, a pip will be a movement at the fourth decimal place. The example of the AUD/GBP currency pair — comparing the Australian Dollar as the base currency and the British Pound as the quoted currency — this might be represented as 0.5768. So one Australian Dollar is worth 0.5768 British Pounds. If this value rises to 0.5769 or falls to 0.5767, this would be a movement of one pip.

But putting the pip at the fourth decimal place may be too precise in some cases. For instance, in the AUD/JPY pair — the Japanese Yen is the quoted currency; the Yen is a currency with tiny denominations, so we need to define a pip differently. With this currency pair, a pip would be found at the second decimal place, as a movement at the fourth decimal place is too small to provide any actionable insight.

Alternatively, some traders may want to view price movements in even greater detail. For example, they may decide to look at pipettes rather than pips — this means adding another decimal place to the reading. So, in the instance of the AUD/GBP pair — and most other pairs — a pipette will be at the fifth decimal place, ten times smaller than a pip. In the example of the AUD/JPY pair, the pipette will still be ten times smaller than the pip but will be found at the third decimal place.

How pips work with forex derivatives

Forex traders can use different techniques and strategies to approach the foreign exchange market. While all of these strategies, techniques and fx derivatives are different in their ways, they are united by one key aspect — all rely on price movements measured in pips. Take a look at how pips are used across these different forex strategies.

• Pips and forex futures

When traders use forex futures contracts, they agree to buy a predetermined amount of a set currency at a locked-in price. Futures traders can use forex pips to examine whether or not the contract was the right choice, based on the price movement, although they will still be obliged to make the trade at the end of the contract period.

• Pips and forex forwards

Forwards are similar to futures in that they are obligated to complete the trade and involve predetermined currencies, set periods, and locked-in prices. However, they are not traded on the exchange platform and are sold OTC (over the counter) via a broker. Traders will assess the success of the forward contract by examining price movements measured in pips.

• Pips and forex options

Again, options involve predetermined factors such as currency type, time duration, and a locked-in purchase value. However, there is no obligation to complete the trade at the end of the contract period. With this in mind, traders will use pips to decide whether or not they should go through with the trade when the contract expires.

• Pips and forex swaps

With a forex swap agreement, parties agree to trade one currency for an equivalent value of another over a set period. Interest is paid on the trade, and the transaction is reversed at the end of the agreement period. Pips are essential for analysing the progress of the trade, as well as for planning future swaps.

• Pips and forex spot trading

Spots are not derivatives but an essential aspect of forex trading. Engaging in spot trading means opening positions based on the current value of a currency pair. Analysing pips helps traders to understand potential market movements as they decide whether or not to execute a spot trade.

How pips work with forex leverage

Pips are vital when it comes to using leverage in forex trading. When traders use leverage, they borrow capital to supplement their money. Traders can choose to use only a small amount of leverage, or they can leverage at a higher ratio, significantly increasing their exposure to market forces.

For example, a trader may choose to leverage a trade at a ratio of 10:1. This means that for every $1 they use to open the position, they borrow $10, achieving 10x the exposure. At 20:1, this rises to 20x, and so on. When leveraging, traders can potentially experience increased profits multiplied by the magnitude of the leverage ratio. However, the potential losses are multiplied too, so leveraging should be handled with extreme caution.

So what does this have to do with pips? Trading on leverage magnifies everything, including pip values. While a single pip movement may only result in a tiny profit or loss on an un-leveraged trade, leverage multiplies this value. At 10:1, each pip is worth 10x as much; at 100:1, each pip is worth 100x as much. Generally, these increases are limited at 500:1 — usually, the maximum amount of leverage permitted on a trading platform.

Pips and beginner traders

When beginners learn how to trade FX currency pairs, they will need to get used to the interface they are using while also growing their understanding of the tools and indicators necessary to execute trades. Pips are among the first things beginner traders will have to do.

As traders become more confident, they can use advanced indicators and tools to forecast future movements in the forex market. While these indicators and tools cannot guarantee future successes — and traders of all experience levels can suffer losses in the market — they help develop a more sophisticated and diverse strategy. However, traders need to know how to read and analyse pips to get to this point. Forex tickers and graphs are all based on information provided by these pips.

This is why demo accounts are so helpful as individuals learn how to trade forex. With a demo account, traders can get used to looking at incremental price movements and analysing the direction of these movements over time — all in a risk-free environment. As no money is changing hands, there is no potential for profit when using a demo account, but there is no potential for losses. This makes demo accounts a vital asset for traders starting on their journey.

The benefits of understanding forex pips

Gaining a solid understanding of pips provides many different benefits to forex traders. Learn more about some of the essential advantages: 

• Quick and reliable insight

Perhaps the most significant advantage of understanding forex pips is gaining immediate insight. Forex price changes happen quickly and are delivered in real-time. As a result, traders need to be able to check their platform’s interface and understand these changes at a glance, and pips are a big part of this.

• An understanding of past price movements

Pips also give traders the ability to view and understand past price movements. These price movements do not guarantee future movements in the same direction, but they help traders make informed predictions.

• A more knowledge-based approach to leverage

Leverage effectively magnifies the impact of minute pip movements. Therefore, understanding pips is crucial for traders seeking to get the most out of their leveraged positions.

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Key advantages of forex trading

As traders learn more about the forex market, and as they start to use the tools and features of their platform in an effective way, they can begin to realise a number of genuine advantages of forex trading. It’s important to remember that advantages are not guarantees, and there is no such thing as an infallible forex strategy. Despite this, there are many benefits of forex that are not necessarily found in other types of market trading.

High levels of liquidity 

Liquidity is a major benefit of trading forex. The forex market is one of the most liquid and volatile financial markets in the world, which means traders have the potential to quickly make profits on their positions. Even short-term scalpers and day traders can make profits in the market, provided that their strategies are effective and their predictions are correct.

Of course, this liquidity means the market can quickly move in the opposite direction too. There is no way to completely eliminate risk in this market, and even the most experienced traders may suffer significant losses.

Flexible trades across different market conditions

An important advantage of trading forex is the potential to make a profit even across different market conditions — although it should be noted that profits are never guaranteed, regardless of past market performance. 

Traders can decide to go long on a trade, which means they open a buying position in the anticipation that the value of a currency will increase over time. If this value does in fact increase, they will receive a profit. Alternatively, traders can open a selling position — also known as going short — if they expect that the value of the currency will fall during their trading window. If their prediction is correct, they will take a profit.

This enables flexible trading whether the market is growing or declining, giving traders more choice. There is always the risk that the market will move in the opposite direction, however, and traders should act cautiously and conservatively when they approach the FX market.

Relatively easy access to the market

It certainly takes time and effort to learn how to trade forex effectively, and traders 

should be willing to research and grow their experience in the long term, but it is still relatively easy to start out trading FX. This important benefit of forex trading can be easily achieved with a trading platform’s demo account.

With a demo account, users can access all of the tools and features that are available on the trading platform. They can view performance data, analyse the market in real-time, and make practice trades as part of their education and development. There is only one difference between a demo account and a live trading account — the risk. With a demo account, there is no risk, as no capital is required. This means there is no potential for profit, but no potential for losses either.

Traders should use the demo version of the platform to familiarise themselves with the forex environment. After they have grown confident in the market, they can graduate up to a live account and begin trading for real.

The ability to increase exposure through leverage

While changes happen quickly in the forex market, and currency prices change on a second-by-second basis, these movements tend to be small in the short term. When traders open their positions only for a short time, their market exposure is low — which means their potential profits and potential losses will be low too. 

It is possible to increase this level of exposure through a process known as leverage. Leverage in forex basically means to supplement the trader’s own capital resources with borrowed capital. This enables the trader to control positions worth far more than their own resources will allow — a significant forex benefit for experienced traders. 

Leverage is generally presented as a ratio. For 10:1 leverage, $10 is borrowed for every $1 taken from the trader’s own capital, and the trader controls a position worth 10x the amount they would have controlled otherwise. The leveraged capital will need to be paid back whether the trade results in a profit or not, which means traders need to take great care when using leverage.

The potential to build a diverse trading strategy

One of the reasons why forex trading has become so popular is its potential for diversity. Traders have a wealth of different choices at their disposal when they approach the FX market. These include the following:

• FX options

An FX option is a contract that locks in place a set currency value for the duration of the trade. Once the contract reaches maturity, the trader has the option to complete the transaction, giving this derivative its name.

• FX futures

FX futures are similar to options in that the currency value is locked in place for the duration of the contract. The futures derivative is a standardised contract traded on an exchange, and the trader is obliged to complete the transaction once the contract reaches maturity.

• FX forwards

FX forwards also lock in a currency value over a set period of time, and — like with FX futures — there is an obligation to complete the transaction at the point of maturity. However, unlike futures, these derivatives can be customised to meet the needs of traders.

• FX swaps

With an FX swaps derivative, there is still a time element, but the trade is executed at the beginning of the time period. A set amount of one currency is exchanged for an equivalent amount in another currency, and interest is paid on the trade. At the end of the swap period, the exchange is reversed.

• FX spot trading

Spot trading is not an FX derivative, as it is based solely on the current market value of the currency in real-time. However, spot prices provide some of the underlying data to the forex derivatives listed above. 

Quick and straightforward insight with experience

As traders grow their experience and become familiar with using their forex platform’s dashboard, they can begin to achieve insight and understanding at a glance. With an intuitive and clearly presented interface, the trading platform will provide real-time information on the performance of currencies in the foreign exchange market. This in turn helps users to unlock numerous trading benefits as they develop into confident traders.

FX price movements are measured in pips. Pips in FX are small movements at the fourth decimal place of the currency value — or at the second decimal place in the case of quote currencies with a smaller denomination, such as the Japanese yen. Reading these movements, and analysing previous movements in the marketplace, gives users the opportunity to maximise the forex trading benefits they encounter.

A huge range of different currencies and currency pairs

As well as diversity in trading styles and derivative types, there is also diversity to be found in the currencies themselves. Currencies from all over the world are found on the forex market, and traders will be able to take advantage of this as they open and close positions.

From major pairs like AUD/USD (bringing together the Australian Dollar and the United States Dollar) to less commonly traded pairs like the EUR/TRY (the European Euro and the Turkish Lira), the forex market represents a wealth of potential for traders.

The chance to trade around the clock

The trading day is finite, and there are opening and closing times — for instance, the market will be closed at the weekend. However, during the week the market is open 24 hours a day. As forex is of global interest, trades are always being made. Even in the middle of the night in Australia, the European and American markets will be experiencing daytime trading rushes. 

This means the liquidity discussed above is an ever-present feature of the market during the trading week. Users often find this a useful benefit of trading forex, as they can build their strategy around their own schedule.

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