Impact of Gold

The price of gold often reflects sentiment towards the US Dollar, as gold prices and the US Dollar Index have had a fairly negative correlation historically. In times of economic and political crises or general uncertainty, gold is often viewed as a safe-haven. It has in recent years competed on this front with US Dollars/Treasuries,Read More

Impact of Crude

With the modern world dependent on hydrocarbon-based fuels, and with many of the G7 countries net importers of oil, the direction and absolute level of crude prices should be monitored. Sustained spikes in CME-listed WTI (West Texas Intermediate) crude near month futures to levels above USD 100/barrel tend to trigger market fears over a slowdownRead More

Central Bank Intervention

Central banks particularly of export reliant economies intervene periodically by buying or selling their domestic currency, or by setting overnight interest rates. Because exchange rates affect the cost of imports, the competitiveness of exports and the cost of maintaining and servicing foreign debt, an exchange rate that moves too quickly or too far in oneRead More

Inflation

The analysis of interest rate expectations goes hand in hand with analyzing inflation expectations, as a central bank generally raises short-term interest rates to boost the strength of its local currency and to stave off inflation. By increasing short-term rates, investors are encouraged to buy local currency through the higher interest rate earned, and greaterRead More

Economic Calendar

The market knows in advance when various key economic statistics are to be reported by the various government ministries and reporting agencies, as the data releases follow a predetermined schedule as seen on this site’s economic calendar. The absolute figures released are not as significant as whether they beat expectations or fall short, and byRead More

FOMC

The Fed Open Market Committee (FOMC) meets every six weeks (twice a quarter), reviewing economic indicators (leading, lagging and co-incident), and announcing their views towards current monetary policy. You can visit www.federalreserve.gov to get the Fed’s current view of the financial markets. The FX trader should pay attention to FOMC meetings or central banker summits,Read More

Dual Currency View

Because of there being two currencies involved in a FX pair, it is important to have a view on both currencies before formulating a trade. To help improve the likelihood of a trade’s success, a trade should only be entered when bullish on one currency and bearish on the other. For instance, under the expectationRead More

Financing

Holding open spot FX positions beyond the spot settlement time results in a rollover of the position and interest earned on the currency bought and interest paid on the currency sold. This interest differential can be either a financing cost or interest income, working for or against the position, depending on the interest rate levelsRead More

Leverage

A retail FX trader can leverage available capital by trading on margin, in the same way that futures and CFDs can be traded with substantial leverage. With a cash deposit or initial margin (required to maintain each position entered), a position many times larger than the size of the deposit can be entered. The depositRead More

Big Figure and Handle

A one hundred point (“pip”) move is referred to as a one “big figure” move. The following example illustrates a one big figure move: The term “handle” is sometimes used interchangeably with “big figure” by FX dealers, where a FX dealer would respond to a verbal Request For Quote (RFQ) by omitting the “handle” orRead More