Tag Archives: Forex News

Understanding Forex Commission Structures

Unlike most other exchange-driven markets, forex has an enticing feature that brokers take full advantage of in their continual bid to lure in investors: no exchange fees, regulatory fees, data fees, or commissions. To many first-time traders, this gives it a major advantage over other markets, but accepting such a bargain doesn’t always mean that you get the best deal available.

Read on to discover how to choose the commission structure that will work best for you…

Three Forms of Commission

Forex brokers offer three different forms of commission to their traders: fixed spread, variable spread, and commission based on a percentage of the spread. These options each have their advantages and disadvantages, which means that there’s no simple answer when it comes to choosing which of them will work best for you.

However, before you can make an informed decision, you need to understand what spread is. Spread is the difference between the price the market maker will pay you for buying the currency (the bid price) and the price at which they’re prepared to sell it to you (the ask price). It is calculated in pips. If your broker quotes you EURUSD – 1.5550 – 1.5552, the spread would be two pips, for example.

To work out how this translates into real money, it can be useful to use the trading calculators that some brokers provide.

Fixed Spreads

If you choose a broker offering a fixed spread, then the difference between the bid and ask price, and thus the spread, in the above example would always be two pips. This would not be affected by market movement, either positively or negatively. At first glance, this can seem like the best choice, as it provides you with certainty. For some people, it will be, but for others, it is worth considering the other options available to you.

Variable Spreads

For those who are not averse to risk, variable spreads can prove a wiser choice. These spreads will change in accordance with market movements. On the one hand, this could mean that they rise to as much as five pips; on the other, it can see spreads drop to as little as 1.5 pips.

Commission

There are also brokers who will earn money through charging a small amount of commission. The benefit of this type of broker is that they often have a good relationship with a large market maker who can pass tight spreads onto you.
Each type of commission will have a different effect on your trading. Of course, part of this will be influenced by your individual broker, but that doesn’t mean that it isn’t worth considering their individual merits and pitfalls. Which one do you think would work best for you?

US Department of Justice Expands Probe Into Forex Deals – Major Banks Involved

We’ve seen numerous inquiries over the last couple of years by government departments looking into the world of forex trading, and this past weekend saw the United States Department of Justice open up its own probe to include two additional banks, and those are Barclays and UBS.

Forex is an increasingly popular investment option for investors of all levels these days, and some may argue that current rules and regulations are struggling to keep up, which is one of the reasons we so often see these investigations. It’s not that the investors or smaller brokers that deal with investors, such as ThinkForex, that are doing anything wrong; it’s almost always been major banks either misleading or miss-selling products.

That is exactly the same case this time round, as the Department of Justice has reason to believe that both Barclays and UBS have been selling a variety of structured products without making it clear how much they were making on each of the forex trades. In this case, these products were not small-market; there’s reason to believe some major Swiss hedge funds bought into the products, and they may well have been the ones to alert the authorities that something was amiss.

Knock-On Effects

To the day trader, these kinds of investigations probably don’t appear all that important, but there is of course an interesting question to be raised – who is your broker’s broker? Many of these major banks are enabling the smaller brokers that you might be used to dealing with day-to-day, and they’re not invulnerable to knock-on effects. At the beginning of the year, we say major brokers including Alpari UK and LQD Markets go bust because they lost their liquidity. The situation isn’t exactly the same, but it certainly is worth bearing in mind.

As already mentioned, this isn’t exactly a new investigation. Several other banks are already under scrutiny by the Department, all with the same charge of simply not disclosing the relevant information properly to their clients involved in the forex markets.
In the coming days, we’re likely to see more information coming out, but at this stage we’re mostly in the dark in regard to specifics. The Financial Times first broke the news story on Sunday, but since then there has been no comment made by the Department of Justice, or indeed Barclays or UBS.

The October 2013 issue of Currency Trader magazine is ready to download

Hey fellow traders. If you’re into the Currency Trader magazine you may want to know that the Oct issue is out. For those of you who have never heard of this magazine, it is as far as I’m aware the only magazine dedicated to currency trading.

1. Click here to download the current issue.

2. Click here to download last month’s issue.

Anyways, hope you enjoy it!

Happy trading!

Alan

NFA Accuses FXDD of Differential Slippage and More

The NFA has filed complaints against FxDirectDealer LLC and James Emerson Green, who was FXDD’s Chief Compliance Officer at the time.

The case summary is…
On June 29, 2012, NFA issued a Complaint charging FXDD with using asymmetrical price  slippage settings that favored FXDD over customers; failing to supervise the trade integrity of the firm’s electronic trading systems; failing to maintain complete and accurate records; failing to review the use of promotional material; making improper price adjustments in customers’ accounts; knowingly converting customer funds; failing to implement an adequate AML program; and failing to develop and implement adequate procedures to ensure that all entities and persons that the firm does business with are registered with the CFTC and NFA Members. The Complaint also charged FXDD and Green with willfully submitting misleading information to NFA and others; failing to treat all customers equally when giving price adjustments; and failing to supervise.

The case details file shows that the NFA accuses FXDD of gaining more than 3 million dollars from this differential  slippage scheme.

What is more interesting is that FXDD is accused of unilaterally removing profits from client accounts because the customers had “manipulated” FXDD’s trading system by executing trades at “off-market” prices.

FXDD did not contact the NFA about this. When the NFA became aware, they asked FXDD for evidence. Here are some selected quotes…

Over the course of several weeks, from December 2011 to early February 2012, FXDD failed to produce any credible  support to substantiate its claim that these customers had manipulated the firm’s  trading platform or executed orders at “off-market” prices.

NFA repeatedly advised Green that these actions on the part of FXDD constituted violations of Compliance Rule 2-43…

However, NFA later learned that FXDD’s supposed return of profits it had removed from the nine customer accounts was illusory and was apparently merely a ploy to mislead the NFA and buy time for FXDD to file suit seeking a temporary restraining order and preliminary injunction against the nine customers.”

FPA member Raimundas is one of those dealing with FXDD’s refusual to comply with the NFA.

There are other issues in the complaint. You can read them by following these links…

Click here to see the NFA Case Summary

Click here to read the NFA’s complaint against FXDD. Please check paragraphs 33-50 to see more about the situation Raimundas is dealing with.

News source: Forex Peace Army

Dollar Demise Continues – China, Japan to Use Yen, Yuan and Not the USD

It looks like the US Dollar is about to be dealt another blow. Although it won’t be a deadly blow it definitely is not good for the long term success of what is now still the world’s major reserve currency.  I came across an article on the GoldSeek website that talks about how Japan and China will stop using the US Dollar to conduct trade with each other.  Time to short the US Dollar? Perhaps so!

Details can be read in the republished article.

Article follows below. Enjoy.

In the next month China and Japan (China’s main trading partner) will no longer use the U.S. dollar as the only currency in trade with each other. They will use the Yuan and the Yen directly with each other. This will see the dollar removed from a large chunk of the world’s trade –in itself, not a very large percentage, but a significant one. It’s the start of a trend that is set to grow. We’ve no doubt that China is tailoring its trade with all its trading partners to use the dollar only so far as it is required to deal with the U.S. and other dollar-dependent nations. Oil from Russia utilizes the Yuan and Rouble, and Australia has arranged a similar deal.

The purpose of foreign exchange and gold reserves is to provide ‘global money’ (which includes gold) for potential rainy days. China will therefore build up reserves in all the currencies that it will trade in. All this will take place at the expense of the dollar. Currently the U.S. dollar is used in around 76% of the world’s trade. More importantly for the dollar, its use as a reserve currency (it currently comprises 63% of global reserves) will diminish in line with the growth of Yuan/ other currencies.

Currencies in Japanese/Chinese Trade

To explain the process more clearly, when a Chinese company buys goods from Japan, it sells Yuan and buys dollars in its place, for delivery to the Japanese supplier. The Japanese supplier then sells the dollars for Yen. This brings many risks to the transaction because both the Yen and the Yuan are constantly moving against the dollar and the dollar is driven by its own economy and pressures. By going direct, these risks and extra costs are eliminated. Likewise the influence of the U.S. over global trade is diminished, for this trade will no longer require the vast amount of trade to go ‘via New York’.

U.S. Power and Influence Changing

Earlier this month, we produced an article that discussed the purchase of Iranian oil in the Yuan and Indian Rupee. U.S. influence and power over world oil supplies has been complete because of the sole use of the U.S. dollar in the oil price. But when Iran dropped the dollar from its oil sales, this power was undermined. The U.S. tried to bring India and China on board in punishing Iran –over its nuclear developments— but had extremely limited success. The U.S. then used the SWIFT system of banking alongside its own banking system to block Iranian oil sales and their payments. China and India used their own currencies and clearing systems to bypass these blockades. As we pointed out in the earlier article, this was not simply a financial development but a shift in power to the East. The Iran story highlights the importance of the development of the Yuan’s growing use.

China’s viewpoint is not to challenge or attack the U.S. but to develop systems that will be in its own interests and independent of outside political or financial influences. Unhappily for the U.S. this is leading to the decline in U.S. power, both politically and financially. With China and the emerging world accounting for over half of the world’s population, the potential growth here will mean an eventual huge curtailment in U.S. power and influence. The agreement with Japan marks a major step forward in this process.

Fragmentation of the Present Monetary System

Since the Second World War and through the Bretton Woods system to today’s monetary system, the dollar and the U.S., with its power and wealth, has ensured its continued success, sometimes against basic fundamental reasoning –such as the ability of the U.S. to just print dollar to cover its Trade Deficits on an ongoing basis, a sort of Tax on the rest of the world. Indeed, the dollar, with its link to oil, is the tree-trunk of world money with all other currencies acting almost as branches growing out of that tree. The steps being taken by China now is another tree (currently a sapling) growing alongside it and eventually no longer dependent on it. The worry is that this new tree is sapping the old tree of its strength. We are certain that China will do all in its power to ensure it minimizes the influence the U.S. has over its financial system.

The dangerous period for the two trees is when the new sapling is not strong enough to stand alone and the old tree is ailing. This is the time when support is needed for both. That support has to be independent of both for it to give effective support. That support must convince all in the monetary world that it will give enough inherent strength to shore up the weaknesses of both. But at the same time this support must be a common denominator throughout the financial world.

If the transition of power and through changes is smooth, then a new shape to the world’s money will be easily accepted. But in all of man’s history, such transitions have been far from smooth or peaceful; they’ve been marred by confrontation and breakdown and usually both. We see this future for the monetary world in the face of these developments.

With the debt debacles on both sides of the Atlantic, the developed world’s monetary system is vulnerable to such pressures as never before. The monetary system now faces structural pressures that are bound to lead to turmoil and deeper crises, not simply inside nations, but ones that will shake up global foreign exchanges and breed more and more uncertainty. The last few years of financial crises in the developed world will seem tame by comparison. The separate interests of the developed world and the emerging world will emphasize the uncertainty and lack of confidence that will hang like a cloud over the world’s changing money systems.

Source: Goldseek.com

Dukascopy Afternoon Forex Overview

Dukascopy Bank SA

Dukascopy Fundamental Analysis
EUR

Nicolas Sarkozy, France’s President, said that the country may consider withdrawing for Schengen zone unless more efforts are put in stopping illegal immigration. Sarkozy speaking at President’s election rally stressed that the progress has to be made during next 12 months otherwise France will exit Schengen zone. Illegal immigration is expected to be the core issue during elections in France.

USD

Crude oil futures eased down during the Asian session on Monday as traders started to cash out from the market after crude oil moved higher on the positive US labour data. Light, sweet crude oil futures for April delivery traded at 106.92 US Dollars per barrel on the New York Mercantile Exchange, tumbling.

GBP

According to Lloyds Bank Corporate Markets, concern of losing their jobs has been decreasing among Britons for the second month in the row. Job security index gaied 2 points in February, currently standing at -22 points. Bankers believe the labour market has still a long way to go to reach the pre-crisis levels of job security.

CHF

The official SNB exchange rate for EUR/CHF is 1.2057 today; yield on 10-year Swiss Confederation bonds decreased to 0.72%. 3-month LIBOR CHF stands at 0.09%, and is within the target range of 0.00-0.25%. Swiss SMI stock index has lost 0.04% since the opening bell, and is currently fluctuating around 6185 points.

JPY

Japan’s Nikkei Stock Average retreated after gains in previous two sessions as Yen appreciated and China reported a record high trade shortfall in February. Nikkei 225 index edged 0.4% or 39.88 points down to 9,889.86 with eight of ten industries posting losses. Nippon Paper Group led the drop among paper firms on a report which showed the wholesale prices of high-quality paper fell. Panasonic added 0.7% on news it plans to increase its sales of appliances by the end of March 2016.

Dukascopy Technical Analysis
EUR/USD

Daily maximum: 1.3135
Daily minimum: 1.3078
The single currency depreciated today versus the greenback after the Greece completed the biggest sovereign debt restructuring in history. Daily Resistance: 1.3235; 1.3347; 1.3416. Daily Support: 1.3054; 1.2985; 1.2873. Daily Bias: Strongly bearish.

EUR/JPY

Daily maximum: 108.14
Daily minimum: 107.5
EUR/JPY slipped slightly today, breaching the daily pivot point at 108.18. Daily Resistance: 108.66; 109.13; 109.61. Daily Support: 107.71; 107.23; 106.76. Daily Bias: Bearish.

GBP/USD

Daily maximum: 1.5695
Daily minimum: 1.5606
The British pound fell against the US dollar, heading towars a support level at 1.5551. Daily Resistance: 1.5779; 1.5891; 1.5949. Daily Support: 1.5609; 1.5551; 1.5439. Daily Bias: Strongly bearish.

USD/JPY

Daily maximum: 82.43
Daily minimum: 82.11
USD/JPY declined for a second day, after rising sharply by 87 peeps on Friday. Daily Resistance: 82.90; 83.35; 84.07. Daily Support: 81.73; 81.01; 80.56. Daily Bias: Bullish.

USD/CHF

Daily maximum: 0.9218
Daily minimum: 0.9178
USD/CHF Monday slid modestly towards the support level at 0.9106; technical indicators suggest the pair is likely to recover in the short-term. Daily Resistance: 0.9235; 0.9285; 0.9364. Daily Support: 0.9106; 0.9027; 0.8977. Daily Bias: Strongly bullish.

Press Review
Europe

Euro zone ministers to sign off Greek cash, grill Spain
Euro zone finance ministers will sign off on a second bailout for Greece on Monday and shift their focus to Spain, whose government looks set to violate newly agreed EU budget rules by missing its deficit target again this year.

USA

U.S. stock indexes pause after win streak
U.S. stocks were roughly flat Monday following a three-session rise as Europe readied to seal Greece’s rescue package and after China reported a large monthly trade deficit.

Asia & Pacific

Japan Machinery Orders Beat Expectations
Japanese core machinery orders rose more than expected in January from the previous month, a bright sign for economic growth in the first quarter of the year as a pickup in global trade and demand related to disaster reconstruction are beginning to spur growth at home.

Dukascopy Morning Forex Overview

Dukascopy Bank SA

Dukascopy Fundamental Analysis
EUR

“The debt-swap results show that international markets see the prospects the Greek economy has to regain a sustainable fiscal situation”
– Evangelos Venizelos, Greek Finance Minister
Greece pushed through the bond swap offer averting the immediate threat of an uncontrolled default and opening the way for a second rescue package.

USD

“The labor market has found its legs in the last few months, and it looks like there’s enough of a broad base that the momentum can be sustained”
– Julia Coronado, chief economist for North America at BNP Paribas
Employment grew for a third consecutive month in February, a sign the economic recovery is gaining momentum. Employers added 227,000 jobs to their payrolls, the Labor Department said on Friday, while the unemployment remained unchanged at 8.3 per cent.

GBP

“Manufacturing is past the worst that we saw in the second half of 2011, but it’s still in a very difficult situation”
– Howard Archer, chief European economist at IHS Global Insight
U.K. manufacturing output rose less than expected in January, said the Office for National Statistics on Thursday. Factory output gained 0.1 per cent from December, a sign the economy is still facing headwinds.

CHF
“The worst case scenario of a disorderly default has been cast aside, and this is a relief for the market”
– Benoit Peloille, equity-market strategist at Natixis
The Swiss blue-chip index SMI, a measure of the largest and most actively trad ed companies, gained 0.56%, or 34.58 points, to 6,188.51. The broader Swiss Performance Index rose 0.61%, or 34.66 points, to 5,681.28.

JPY
“It’s big that Greece is becoming less of a drag as the global economy rebounds”
– Kazuyuki Terao, chief investment officer of RCM Japan Co
“It’s big that Greece is becoming less of a drag as the global economy rebounds,” said Kazuyuki Terao, chief investment officer of RCM Japan Co.

Dukascopy Technical Analysis
EUR/USD

“We’re getting steady improvement in the U.S. while the European economic situation remains challenging”
– Wells Fargo (based on CNBC)
Being that EUR/USD’s growth will be halted by resistances located at 1.3285/91, 1.3325 and 1.3389, the outlook remains negative. The initial target lies at 1.2974/54, while a long-term goal is at 1.2624.

EUR/JPY

“The worst case scenario of a disorderly [Greek] default has been cast aside, and this is a relief for the market But the long-term solvency question remains”
– Natixis (based on Bloomberg)
Despite a recent failure of EUR/JPY near 108.75, formidable support at 106.37 should manage to contain dips. Afterwards we are likely to observe a recovery of the pair from the latter level. Rally should be able to extend beyond 108.75, up to 109.32/58 (55 week ma).

GBP/USD

“We expect cable to trade in the $1.57-$1.60 band”
– RWC Capital (based on Reuters)
A strong support situated at 1.5876 (200 day ma) is expected to continue to cap the price from above, while the bias of the Cable remains bearish. In the short-term 1.5650/43 is in focus, followed by 1.5581 and 1.5500.

USD/JPY

“The downside risk to U.S. growth is fairly limited from here”
– Russell Investment Group (based on Bloomberg)
As long as a key support at 80.86 is not violated, USD/JPY is likely to carry on advancing. The pair has already overcome 82.23 and should reach 83.80 soon enough. Within a longer time span, 85.53 and 86.80 are expected to be attained.

USD/CHF

“Tuesday’s retail sales could revive more QE3 talk, especially if the data is weaker than expected”
– WSJ
USD/CHF currency couple is currently gaining bullish momentum, as it is being supported by strong levels at 0.9088/66 and 0.8931. The initial target lies at 0.9246 (55 day ma), which guards 0.9317.

Press Review
Europe

Greece Now Has ‘New Starting Point’: Greek FinMin
After its second bailout was secured on Friday, Greece has been given a “new starting point” to try and restore its struggling economy to health, Greek Finance Minister Evangelos Venizelos told CNBC.

USA

Shares pause after U.S. jobs, monetary policy in focus
Asian shares fell on Monday as investors paused to assess the effect of strong U.S. jobs data, which scaled back expectations of more easing ahead of this week’s Federal Reserve meeting, while uncertainty over Chinese growth also weighed on sentiment.

Asia & Pacific

China reports large trade deficit as imports surge
China posted its largest trade deficit in at least a decade in February after imports of commodities jumped as companies built up supplies.

Dukascopy Afternoon Forex Overview

Dukascopy Bank SA

Dukascopy Fundamental Analysis
EUR

Germany’s factory orders unexpectedly slipped in January as overseas demand for machinery and similar investment goods fell. Factory orders lost 2.7% compared to a 1.6% gain in December, said Economy Ministry. Economists questioned by Bloomberg earlier predicted an 0.6% increase. On yearly basis orders have dropped 4.9%. Euro erased morning gains on report.

USD

Republican Mitt Romney, ex-governor of Massachusetts won the primary presidential election in Ohio. Romney gained 38% of votes, followed by former Senator of Pennsylvania Rick Santorum with 37%, Speaker of US house Newt Gingrich with 15% and US Representative Ron Paul with 9% support.

GBP

After a rapid drop of 1.9% in previous session, British FTSE 100 index retreated and climbed 0.5% on Wednesday as investors awaited results of a Greek debt swap agreement. Mining sectors recovered from losses with Kazakhmys PLC adding 2.6% and Eurasian Natural Resources Corp gaining 2.3%. Admiral Group PLC jumped 10% on better than expected pre-tax profit for 2011.

CHF

Swiss unemployment rate was stable in February for the third month in line, reported the Swiss State Secretariat for Economic Affairs. The jobless rate remained at 3.1% on a seasonally adjusted basis last month, being in compliance with expectations. However, the number of individuals without job increased slightly by 1,163, approaching 133,154.

JPY

Japanese Yen kept appreciating versus its main counterparts on Wednesday as weaker Asian stock markets and investor lack of confidence about Greece’s ability to finalize debt swap agreement bolstered demand for safer currency. The Yen strengthened against the Euro to JPY 106.01 in Asian trade and added 0.3% versus US Dollar to JPY 80.67. Currently EUR/JPY is trading at JPY 106.22 and USD/JPY is trading at JPY 80.77.

Dukascopy Technical Analysis
EUR/USD

Daily maximum: 1.3163
Daily minimum: 1.3100
The single European currency slumped further today versus the US dollar as German monthly factory orders fell more than expected (-2.7% act./0.6% est.). Daily Resistance: 1.3191; 1.3391; 1.3947. Daily Support: 1.3069; 1.2990; 1.2725. Daily Bias: Strongly bearish.

EUR/JPY

Daily maximum: 106.39
Daily minimum: 105.71
The pair continued moving downwards today after touching the daily forecast mean (106.39) as uncertainty over the Greek debt swap persists. Daily Resistance: 107.40; 109.17; 112.29. Daily Support: 105.18; 104.07; 101.58. Daily Bias: Strongly bearish.

GBP/USD

Daily maximum: 1.5758
Daily minimum: 1.5698
The Cable traded under a bearish momentum as the pair retail sales rose for the second month in a row in UK. Daily Resistance: 1.5833; 1.5948; 1.6057. Daily Support: 1.5648; 1.5562; 1.5503. Daily Bias: Strongly bearish.

USD/JPY

Daily maximum: 80.96
Daily minimum: 80.59
Japan’s yen appreciated today on rumors the Bank of Japan is going to intervene to support local exporters, leaving the 80.98 intact today. Daily Resistance: 81.45; 82.31; 83.19. Daily Support: 80.45; 79.31; 77.55. Daily Bias: Neutral.

USD/CHF

Daily maximum: 0.9200
Daily minimum: 0.9159
The pair pierced the daily forecast mean (0.9171) as ADP non-farm payrolls rose more than expected (216K act./204K est.). Daily Resistance: 0.9217; 0.9290; 0.9460. Daily Support: 0.9135; 0.9005; 0.8883. Daily Bias: Bullish.

Press Review
Europe

Greek bond swap prospects lifted by pledges
Major banks and pension funds threw their weight behind Greece’s bond swap offer to private creditors on Wednesday, raising the likelihood that the deal will go through and a 130 billion euro international bailout package would be secured.

USA

Productivity in U.S. Cools as Labor Costs Jump
The productivity of U.S. workers rose at a slower pace in the fourth quarter and labor costs jumped, indicating businesses are reaching the limit of wringing efficiency from their workforce.

Asia & Pacific

RBA Could Cut Rates If Jobs Data Also Disappoint
With Australia’s 2011 fourth quarter GDP growth coming in well below market expectations, analysts tell CNBC there’s increasing pressure on the country’s central bank to cut interest rates if Thursday’s unemployment numbers also disappoint.