Forex Insights 26-March-2019

USDJPY

• Analysts explained that USD/JPY has eroded the 55-day ma and the 2-month uptrend at 110.25/33

• USD/JPY is currently trading at 110 the figure, trading between a range of 110.24 and 109.70.

• Japanese yen near six-week highs on global growth fears and moved for its biggest gain since January as safe-haven buying propelled the currency.

• USD/JPY attempts the retrace the sharp decline following the Federal Reserve meeting, with the pickup in volatility spurring a more material shift in FX sentiment, but recent price action raises the risk for a further decline in the dollar-yen exchange rate as it extends the series of lower highs & lows from the previous week.

EURUSD

• Euro firmed on Monday as a stronger-than-forecast German business confidence survey allayed some fears about a recession and pulled the safe-haven yen from a 6-week high against the dollar.

• Euro gets a boost as IFO survey data beats forecast

• EURJPY surged 0.46 percent to a high of 124.81

• EUR/USD vulnerable to furthernear-term losses – focus is on uptrend support just lower

• Euro is down more than 1.1% from the Pre-FOMC high against the US Dollar after turning precisely off yearly open resistance last week.

GBPUSD

• GBPUSD overnight implied volatility has jumped to its highest level since November 15 as forex option traders price in the latest Brexit uncertainty.

• GBPUSD currency traders who utilize options to hedge their positions and reflects the market’s view that spot prices could experience significant swings over the contract’s respective duration.

• Prime Minister Theresa May stated that she will not put her Withdrawal Agreement to a vote tomorrow due to continued lack of majority support as the latest Brexit drama drags on.

• Currency markets still await clarity on the next direction of Brexit and its impact on the Sterling as the risk of UK departing the EU without a deal remains elevated .

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FOREX INSIGHTS 30-JAN

EUR/USD:

• EUR/USD appears to have met a tough resistance in the 1.1450 region, where sits the key 100-day SMA.

• Extra gains need the pair to clear this area on a sustainable note. The 1.1500 neighbourhood should then emerges as the next target.

• EUR/USD should remain unchanged while underpinned by the 1.1290 area, where coincide YTD lows and the short-term support line.

GBP/USD:

• The recovery in the GBP/USD pair from weekly lows of 1.3058 lost legs just shy of the 1.31 handle, as the bears keep the upside attempts capped amid the return of the Brexit deal-related uncertainty.

• EU likely to reject May’s new plan, Cable could drop further to 1.3000.

• All eyes on FOMC decision ahead of the UK-EU renegotiation.

• UK PM May to renegotiate the Irish backstop with the EU, as Brady’s amendment was approved.

USD/JPY:

• The USD/JPY pair met with some fresh supply and is currently placed at the lower end of its daily trading range.

• The USD remains on the defensive amid dovish Fed expectations and does little to lend any support.

• Focus remains on the latest FOMC monetary policy update and the high-level US-China trade talks.

• Japanese Yen found some support from upbeat domestic data, showing that monthly retail sales jumped 1.3% y/y in December as compared to 0.8% expected but down slightly from the previous month’s strong reading of 1.4%.

AUDUSD:

• The one-month 25 delta risk reversals on the Aussie dollar, a gauge of calls to puts on the Australian currency, has hit the highest level since Dec. 19, indicating investors are unwinding bearish bets on the AUD. riday’s settlement.

• The demand for bearish bets, however, has weakened significantly in the last few weeks. This is evident from the fact that risk reversals stood at stood at -1.0 on Jan. 22 and -1.15 on Jan. 3.

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Money Management in Forex

Money Management in forex is one of the important factor for consistent profit. Due to its volatility, the Forex market is inherently risky. Money management in Forex is therefore a non-negotiable success factor for both beginners and experienced traders alike.

Successful traders in the long run about the single most important factor in trading, and the majority of them will tell it’s a strict way of managing your money and risk. Even the best strategy in the world won’t be of much help if you don’t take care about your risk per trade, reward-to-risk ratios, don’t use stop-loss orders or trade too aggressively.

RISK PER TRADE

Risk per trade is the amount of your trading account that you’re ready to risk on a single trade.
It’s a key aspect of prudent money management that prevents you from blowing your account. Many money management techniques state that the upper limit of your risk per trade should be 2% of your trading account, or even less if you’re a beginner in the markets.

NEVER GO WITHOUT SL

A stop-loss order is the only guarantee that you won’t lose a substantial amount of money on a single trade. Although certain market conditions can lead to your stop-loss order not being executed at the set price, most of the time they work just well to prevent losing your entire account on a few trades.

REWARD TO RISK RATIO

Placing inappropriate take-profit levels can be as damaging to your trading results as placing inappropriate stop levels, as you won’t be able to maximize the profit potential of your trade setup.

Your take-profit level also determines the reward-to-risk ratio of your trade, which simply represents the amount of your risk relative to the potential profit of the trade. While R/R ratios of 1:1 mean that you’re risking the same amount as your potential gain, trades with R/R ratios of 2:1 or 3:1 have double or triple the amount of potential gain relative to the risk.

BETTER LEVERAGE

Leverage offers the opportunity to magnify profits made from the risk capital you have available, but it also increases the potential for risk. It’s a useful tool, but it is very important to understand the size of your overall exposure. Your broker may give you some leverage on your account to enable you to trade for bigger profits. However, you need to be careful when using this facility.

CONTROL YOUR MINDSET

If you do your analysis right, have confidence in your entry and exit levels and let the market determine if you were right or wrong.

Having a strict and written trading plan that contains not only your trading strategy, but also the way you manage money and risk, can help you to avoid emotional trading.

AVOID AGGRESSIVE TRADING

Trading too aggressively is perhaps the biggest mistake new traders make. If a small sequence of losses would be enough to eradicate most of your risk capital, it suggests that each trade has too much risk. A good way to aim for the correct level of risk is to adjust your position size to reflect the volatility of the pair you are trading. But remember that a more volatile currency demands a smaller position compared to a less volatile pair.

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Trading is an art of making handsome amount.

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What are Currency Pair Correlations?

What is Currency Correlation?

Currency correlation depicts an extent to which two currency pairs have moved in same, opposite, or totally random directions over a period of time.

Thought Process:

Why a certain currency pair rises, another currency pair falls?

Why same currency pair falls, another currency pair seems to copy it and falls also?

This is because of correlations between currencies. Correlation is the numerical measure of the relationship between two variables. The range of the correlation coefficient is between -1 and +1.

Positive Correlations: A correlation of +1 denotes that two currency pairs will flow in the same direction.
For Example: Correlation between EUR/USD and GBP/USD is an epitome as if EUR/USD rises then GBP/USD is moving the same direction.

Negative Correlations: A correlation of -1 indicates that two currency pairs will move in the contradictory direction 100% of the time.
For Example: Correlation between EUR/USD and USD/CHF is an epitome of negative correlation, if EUR/USD rises, then USD/CHF falls.

Zero Correlation: The correlation of zero denotes that the relationship between the currency pair is completely arbitrary.

Currency correlation is strongly connected with risk management, and can help you to better understand the market when trading.

Some of the highly correlated currency pairs are:

Positive Correlations:

EUR/USD and GBP/USD (+ 0.89)

EUR/USD and AUD/USD (+ 0.81)

EUR/USD and EUR/CHF (+ 0.93)

AUD/USD and Gold (+ 0.75)

Negative Correlations:

EUR/USD and USD/CHF (- 0.85)

USD/CAD and AUD/USD (- 0.88)

AUD/NZD and NZD/SGD (- 0.78)

USD/JPY and Gold (- 0.78)

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FOREX INSIGHTS 29-DEC-2018

EUR/USD:

• EUR/USD is poised to close nearly 5% lower year-to-date with the pair trading just 1.5% off the 2018 lows.

• For months now, we’ve been tracking a key support pivot in Euro and the focus remains on a breakout of the consolidation range which has governed price since October.

• Price holding critical support confluence at 1.13

GBP/USD:

• Sterling is facing resistance and rallied a bit during the week, reaching towards the 1.27 level.

• The British pound has broken through a significant support a couple of candlesticks ago, and it now looks as if it is offering resistance yet again.

• GBP will continue to struggle, and the breakdown from a couple of candlesticks ago suggests that we are trying to make the next leg lower.

USD/JPY:

• Traders have remained net-long since Dec 18 when USDJPY traded near 112.517; price has moved 1.9% lower since then.

• The percentage of traders net-long is now its highest since Mar 11 when USDJPY traded near 106.9.

• The number of traders net-long is 8.7% higher than yesterday and 2.7% higher from last week, while the number of traders net-short is 14.5% lower than yesterday and 17.2% lower from last week.

CRUDE OIL:

• U.S. oil futures finished higher Friday after government inventory data showed a smaller-than-expected fall in crude inventories, but contrasted with unofficial figures that had showed a massive supply build, sparking a relief rally.

• West Texas Intermediate(WTI) crude for February delivery rose 72 cents, or 1.6%, to end at $45.33 a barrel.

• Oil booked a weekly decline of 0.6% based on last Friday’s settlement.

GOLD:

• Gold prices pressed higher on Thursday as a record surge in stocks showed signs of fading and political uncertainties supported demand for the safe haven metal.

• Gold futures for February delivery on the Comex division of the New York Mercantile Exchange rose $5.70, or 0.45%, to $1,275.45 a troy ounce.

• Gold surged 4% so far in December as investors rotated out of stocks and into the safe haven asset.

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