Tag Archives: Forex

Forex, Market News

This Week: Greenback surge to be confirmed or denied, Australian figures to test Markets sentiment, and oil positions to be evaluated

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US Dollar Strength getting the better of its Australian counterpart, will this continue? Events to be taking place this week may hold the answer.

The Australian Dollar continued to slide last week after the quarterly consumer prices data was released. Data showed that the consumer prices rose by 0.4% in the quarter. This was lower than last quarter’s data of 0.6% and the 0.5% traders were expecting. On an annual basis, the CPI rose by 1.9%, lower than the 2.0% economists and investors alike were expecting. Figures have been decreasing consistently, highlighting overall weakness in the economy.

The data, in conjunction with lethargic wage growth eradicates the urgency for the RBA to hike interest rates in the near future. This notion is further supported by a field of 41 economists from Reuters who were polled on the idea of a hike this term, 40 of whom maintained the perspective that rates will remain steady.

Goldman Sachs analysts concluding that although the Fed is still holding at the projected 3 hikes in 2018, the markets are expecting 4. Notably, issues highlighted relating to the Feds Challenge moving forward will be to introduce policy tightening that will slow growth to a sustainable level without tipping the economy back into recession. Loretta Mester, President of the Federal Reserve Bank of Cleveland, and voting member of the FOMC, has also sided with the above view, indicating that gradual hikes are necessary to avoid overheating and further financial stability risks.

If the Fed does raise rates for the second time in 2018, we can expect to see substantial volatility following the statement release. Some of the results of an interest rate increase, as well as an indication to raise rates for a 4th time this year ( above the stated 3 ), will include a strengthening in the US Dollar, a spike in Utilities & Financial companies, a weakening of foreign currencies, and commodities. We would also see mortgage rates go up as Treasury yields will increase.

As it currently stands, Traders, Bankers, Economists and Investors alike are tipping that chances of a hike at this week’s decision are rather low.

Non-Farm Payrolls, the Unemployment Rate and Average Hourly Earnings for April are scheduled to be released this Friday. Put simply, should the figure show that the economy created more jobs than expected, or if average hourly earnings jumped higher, we will likely see the markets go higher, the US Dollar go higher and oil go lower. Should these numbers disappoint, the markets will likely go lower along with the greenback. Economists will also be looking for any signs that last year’s tax cuts have increased wage growth, or if the savings all just went into dividends and share buy backs. Like in previous months, the Unemployment Rate may drop but average hourly earnings will continue to stagnate, which is what the market is anticipating, deviation from these figures could see opportunities present themselves for the short-term dollar traders.

With Oil in the forefront as it trades at 4 year highs, Traders will be watching the latest Crude oil Inventories release this week. Should inventories increase in the latest reading, we can expect to see the price of black gold decrease. Should we see inventories draw down more than anticipated, we can expect to see the cost increase. Furthermore, if the cost of oil does increase, we can see companies in the transportation sector will likely move lower.

 

Stephen Sismanis

Director
SDS Perpetual Equity

Forex, Options

Forex Traders: Advantages of Margin Trading

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Forex Traders:  Advantages of Margin Trading

Forex traders that are looking for an edge in the market will have find ways of maximizing profit potential without limiting protection against risk.  This is often easier said than done but there are several ways that forex traders can grow profit targets in ways that ultimately benefit their trading accounts.  One of the ways of accomplishing this is through the use of leverage, which allows investors to increase their position sizes without increasing the amount of money that is available in a forex trading account.

Forex brokers tend to have different policies when allowing forex traders to implement the use of leverage in their trades.  In many cases, your forex broker will require a more conservative outlook and limit the amount of leverage to a multiple of 200 or less.  There are many reasons to explain why a forex company would do something like this, and so it is important to remember that trading is their business and that if you are not actively trading in the market their utility is largely reduced.  

New Forex Traders

This can be especially true for newer traders that do not have much actual trading experience themselves.  In these cases, it is critically important to begin with a forex demo account that allows you to place trades under real-time conditions.  If this is not something that is conducted in a proper fashion, you stand to risk more money than you really need to risk and this can really limit your ability to learn about the forex market in a meaningful way.

At the same time, you are in the forex market to generate profits and this is something that can be accomplished much more quickly when you are implementing the use of forex margin in your trading.  It is important to reserve the use of high leverage levels for times when the probabilities are largely in favor of your outlook.  So, for example, this is not something that should be done for those forex traders that are implementing scalping strategies or trading on the very low timeframe currency price charts.   There is less predictability when utilizing those types of strategies, so the use of forex margin and leverage should be reduced in those cases.  

Avoiding Trading Losses

For all of these reasons, the use of leverage in the forex market should be viewed as something that is highly advantageous but must be used with some level of caution as major differences in the market trade and trading outlook can quickly result in losses that should have been otherwise avoidable.  It is often a good idea to select a forex broker that has flexible margin levels so that you are able to tailor your trades in ways that are best suited for the current market environment.  

 

Market News, S&P 500

Will S&P 500 Hit New Record Highs?

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Will S&P 500 Hit New Record Highs?

The S&P 500 is arguably the most important benchmark in the financial markets.  Over the last few months, we have seen some amazing trends that have confirmed a bullish end to 2016.  But now that a lot of the initial optimism in stock markets has fully run its course, investors will be looking for new ways of profiting on a dynamic market that has been defined by bullish sentiment and low interest rates.

For the S&P 500, this has meant new record highs at a fairly regular clip, as investors start to price in the possibility of renewed economic optimism under the administration of President Donald Trump.  When trading this type of event in the market, traders can use the SPDR S&P 500 ETF (NYSEARCA:SPY), which can be traded using the MT4 platform that is made available by easyMarkets.

Stock Market Trends

When looking to make the best investments in the S&P 500, it is essential to understand the cyclical nature of the ways that stock market trends unfold.  If, for example, we were to look at the Elliott Wave Theory, then many would suggest that the markets unfold in a series of wave structures that can be forecasted in advance.  

On the other hand, practitioners of fundamental analysis will need to look at factors like price-to-earnings ratios and industry competition in order to determine which stock investment strategy is best.  So there does not necessarily need to be a one-size-fits-all strategy when looking to gain stock investment exposure in assets that are tied to the S&P 500.  

The world-famous stock benchmark is currently trading at record highs and when we think about the fact that the Federal Reserve has left the economy at relatively low-interest rate levels there is still clear scope that we could see stock market rallies in the S&P 500 index.

S&P 500 Trading Systems

When we are looking at the potential trading systems that can be used to trade the S&P 500, it is important to consider possibilities like options and contrarian strategies that are able to take advantage of stalling momentum or even complete reversals in major benchmarks like the S&P 500.  This is not always something that is considered by traditional stock market investors, but this is an investment strategy that can be used to profit from investments in the other direction when stock markets are trading near their all-time highs.  

Stock Price Chart: GOOG

In other cases, it makes sense to look at other stock market benchmarks like the Dow Jones Industrials and the NASDAQ.  These instruments have their own characteristics when we are looking at the ways stock market investors can implement a stance on the economic outlook.  But now that we have seen some more evidence with respect to the ways the Federal Reserve will probably proceed with interest rate policy over the next two quarters, there are ways for investors to capitalize on these trends as they unfold.