From
major financial institutions to individual investors, participants in the $7.5
trillion per day forex market rely on
dedicated intermediaries to access this vast and complex ecosystem. Operating
behind the scenes but fulfilling a vital role, forex brokers have become the
crucial conduit between regular traders across the world and the fluid currency
markets they aim to speculate in.

More
than just transaction processors, the best forex brokers enhance overall market
functionality. By aggregating massive flows of buying and selling interest,
they provide the underlying liquidity for efficient pricing and swift trade
execution. At the same time, brokers make participating in the global currency
markets easy for traders – by offering online interfaces, analytics, margin
trading and tight dealing spreads.

By
centralizing access and order flows, forex brokers have connected millions of
traders to the thrilling world of currency speculation – enabling anyone to
capitalize on movements in EUR/USD, GBP/USD and other fluctuating exchange
rates. Let’s examine how these behind-the-scenes players make borderless
currency trading possible.

Defining Forex Brokers

Forex
brokers are financial institutions that provide retail and institutional
traders access to the global currency markets. Rather than trading directly
with a market maker, traders conduct currency transactions through a brokerage
platform and interface.

How to
find the best broker? To find out the answer, go here: https://www.earnforex.com/forex-brokers/.

The core
functions of retail forex brokers include:

1. Providing trading platforms and software.
2. Streamlining access to live market prices.
3. Managing customer accounts and processing trades.
4. Offering leverage and other trading services.

By
acting as market middlemen, brokers spare traders from directly accessing the
interbank market. This makes trading more convenient and organized for regular
currency speculators.

Enhancing Market Liquidity

The
gigantic daily turnover in the forex market is underpinned by the constant flow
of buy and sell orders between participants. This order flow is essential for
maintaining market liquidity.

Forex
brokers play a crucial role in aggregating the orders of retail speculators and
channeling this liquidity into the wider interbank market. Without brokers
serving as conduits for currency demand, liquidity in the market would be
severely impacted.

Brokers
enhance liquidity in several key ways:

Channeling
retail order flows. In effect, through consolidating buy and sell orders from
hundreds of thousands of ordinary traders, brokers offer a constant stream of
transactions for market makers and other liquidity suppliers to offer. This
increases the extensiveness of tradable prices.

Bridging
margin trading. Brokers allow clients to trade on margin hence increasing
the trading volumes. The majors brokers provide leverage of up to 500:1 which
amplifies the order flows.

Streamlining
access. In this
capacity, brokers increase their involvement in the forex market by making
currency trading possible at any time of the day through online platforms. More
parties mean more demand, or in other words, more liquidity.

Adding
proprietary liquidity. A large number of brokers are also market makers, which
means they execute customer orders from their own stock to supplement the
market.

Due to
efficiency of the broker in collecting and transmitting orders, the forex
market is highly liquid, which is essential for the fast trades with minimal
effect on the prices.

Driving Price Discovery

Price
discovery refers to the efficient determination of actual asset prices based on
the dynamics of supply and demand. Deep liquidity is vital for effective price
discovery.

By
funneling the aggregated positions of millions of traders into the wider
market, forex brokers drive price discovery across currency pairs. The huge
collective order flows they generate shape prevailing market rates across major
and exotic currency pairs.

When
brokers transmit a surge of buy orders for a specific currency, it exerts
upward pressure on the price, enabling efficient price discovery. The same
dynamic applies to sell orders.

Beyond
influencing near-term price swings, the longer-term positions and strategies of
broker clients ultimately impact currency valuations across the globe. For
instance, a major shift toward long Euro positions at leading US brokers
transfers into euro appreciation over time.

By
reflecting the real-time demand of global traders, brokers help incorporate new
information into currency prices, making them key players in price discovery.

Benefits Brokers Offer Traders

By
serving as indispensable market intermediaries, forex brokers unlock several
benefits for regular currency traders:

Convenience. Brokers offer 24/7 online
trading access without requiring traders to directly participate in interbank
markets. This makes forex trading easy and convenient even for retail
participants with limited capital.

Liquidity
Access. Through
brokers, traders gain access to the phenomenal liquidity of the wider forex
market – enabling swift order fills and limited price slippage. Brokers
aggregate positions to enable institutional-grade liquidity.

Leverage.
Brokers
provide traders the ability to trade on margin, amplifying their purchasing
power in currency markets. Leverage of 50:1, 100:1 or even 500:1 is available,
supercharging potential gains.

Competitive
spreads. By
harnessing aggregated liquidity, brokers can offer tighter dealing spreads to
customers – as low as 0.1 pips for major pairs. This unlocks cost savings for
active traders.

Analysis
tools. Brokers
offer an array of trading analysis tools, from charts to signals, which allow
traders to base decisions on rich market data.

By
delivering these advantages, forex brokers help level the playing field for
retail participants, enabling them to effectively speculate in the world’s
largest financial market.

Conclusion

Forex
brokers fill a vital role in currency markets by serving as conduits between
individual traders and the wider interbank ecosystem. By streamlining access
and aggregating substantial liquidity, they enable efficient price discovery
and provide traders with the infrastructure to implement strategies.

In a
market characterized by enormous daily turnover, brokers enhance liquidity
depth, tighten spreads, and improve participation, leading to
smooth-functioning currency trading. For regular traders seeking to speculate
on movements in EUR/USD, GBP/USD, and other major pairs, forex brokers are
indispensable partners.

This article was written by FL Contributors at www.forexlive.com.

Fundamental
Overview

The S&P 500 bounced
strongly from the lows last week following the good US Jobless Claims figures as the data quelled some of
the fears around the labour market after the weak US NFP report.

That’s been also evident
from the market pricing for rate cuts as expectations for a 50 bps cut in
September kept on being pared back with now a 25 bps move seen as more likely.
Moreover, the Japanese markets shouldn’t be a problem anymore given that the
Japanese officials made it pretty clear that they won’t proceed with more
tightening given the recent volatility in the markets.

All of the above
contributed to a more positive risk sentiment in the market with the focus now
on the US CPI report tomorrow where benign figures will likely give the bulls
some more support.

S&P 500
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that the S&P 500 bounced around the swing low level at 5200 and extended
the gains following the good US jobless claims figures. The price is now
approaching a key resistance
around the 5430 level where we can also find the 61.8% Fibonacci
retracement level for confluence.

This is where we can expect
the sellers to step in with a defined risk above the level to position for a
drop back into the lows. The buyers, on the other hand, will want to see the
price breaking higher to increase the bullish bets into the major trendline
targeting a breakout.

S&P 500 Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that the price recently broke above the strong resistance around the 5366
level and extended the gains as more buyers piled in. The price action has been
tentative though as we head into the US CPI report tomorrow.

If we get a bigger
pullback, the buyers will likely lean on the upward trendline
around the 5270 level to position for a rally into the major downward
trendline. The sellers, on the other hand, will want to see the price breaking
lower to increase the bearish bets into the lows.

S&P 500 Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see more clearly the recent price action. There’s not much we can glean from
this timeframe as market participants will wait for a catalysts or the price
reaching the key levels. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we get the US PPI data. Tomorrow, we have the US CPI report. On
Thursday, we get the US Retail Sales and Jobless Claims figures. Finally, on
Friday, we conclude the week with the University of Michigan Consumer Sentiment
survey.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

That’s the highest reading since February 2022 but it still sits below the 50-year average of 98. That’s the 31st straight month that it holds below said threshold now. Looking at the details, much of the improvement owes to a jump in the Expected Business Conditions component (+1.8) though while most other components were relatively unchanged.

This article was written by Justin Low at www.forexlive.com.

It is pretty much the case of markets just letting out a sigh of relief. That after all the overblown panic in calling for emergency rate cuts on Monday last week. It’s a meme market these days. When things are going their way, it’s all bullish and life is good. But when a retracement or correction comes, suddenly the view changes dramatically to a crash landing from a soft landing. There’s no in between.

Mind you, both the S&P 500 and Nasdaq are both up roughly 12% this year. So, what exactly is that bad again?

In any case, market players are continuing to take in the calm for now. The rebound in Japanese yen pairs is also a helpful factor, with USD/JPY up another 0.4% to 147.85 currently. That’s helping to soothe carry trades in general, after being beaten up badly after the US jobs report.

Meanwhile, S&P 500 futures are up another 0.4% today with Nasdaq futures up 0.6% currently.

Broader market sentiment is holding up but will be due a litmus test later in US trading. We will be getting US PPI data and while this isn’t quite as crucial as the CPI report tomorrow, it offers a bit of a teaser. At least in terms of how markets might react.

For now, the wait continues. And that’s making for a bit of a snoozer so far in European morning trade.

This article was written by Justin Low at www.forexlive.com.

Headlines:

• USD/JPY Technical Analysis – Waiting for a breakout of the range
• Dollar trades more mixed as risk sentiment holds up for now
• BOE’s Mann says still concerned about upside risks to inflation
• US data will keep markets in check for now
• OPEC slashes 2024 oil demand growth forecast on softer China outlook
• Germany July wholesale price index +0.3% vs -0.3% m/m prior
• SNB total sight deposits w.e. 9 August CHF 463.1 bn vs CHF 453.9 bn prior

Markets:

• NZD leads, JPY lags on the day
• European equities higher; S&P 500 futures up 0.2%
• US 10-year yields up 1.3 bps to 3.955%
• Gold up 0.4% to $2,440.27
• WTI crude up 1.1% to $77.68
• Bitcoin up 1.6% to $59,675

It was a quieter session with Japanese markets closed, so that already set the tone during Asia trading.

There wasn’t much to work with in the European morning either, as market players are more fixated on the key risk events later in the week. For now, it is but a waiting game as such.

The dollar is trading more mixed as risk sentiment is holding up better. The unwinding of the carry trade is easing further as traders are breathing easier again today. USD/JPY pushed higher from around 147.10 in Asia to 147.60 while USD/CHF is up 0.4% to 0.8690 in a decent move.

Meanwhile, AUD/USD is up 0.4% to 0.6600 and NZD/USD up 0.5% to 0.6025 on the day. Besides that, the dollar remains little changed against the euro, pound, and loonie.

In other markets, stocks were calmer as well. European indices opened with slight gains but are keeping guarded mostly. US futures are also just a touch higher, not really getting too carried away with any optimistic push yet.

It’s all about waiting for the big data this week to cook. And only until we get to that will markets start to pile on any moves with more conviction.

This article was written by Justin Low at www.forexlive.com.

• 2024 world oil demand growth forecast seen at 2.11 mil bpd (previously 2.25 mil bpd)
• 2025 world oil demand growth forecast seen at 1.78 mil bpd (previously 1.85 mil bpd)

On the change, OPEC says that softening expectations for China’s oil demand is the main reason for that. But the bloc maintains that despite a slow start to the summer driving season, fuel demand is expected to remain „solid due to healthy road and air mobility“.

This article was written by Justin Low at www.forexlive.com.

All the focus and attention this week is on the US CPI report on Wednesday. But just before that, we will be getting the same report from the UK as well. The thing is given base effects, it is estimated that headline annual inflation in the UK is going to increase from 2.0% in June to 2.3% in July. That will mark the first increase in said reading since December last year.

Logically, this plays into the view among major central banks now that the disinflation process is going to encounter some „bumps along the road“. But this is a market that was very much driven by emotions for the past week or so. As such, market players may not be as composed as you would expect in seeking out a logical reaction initially.

The key detail though will be the core annual inflation reading. That is estimated to hold similar to June at 3.5%. If so, that is likely to help calm the nerves among traders. However, if there is an upside surprise there, then we could see risk trades start to get a bit jittery again ahead of the US CPI report later on in that day.

The BOE already made a cut to its bank rate in a knife-edge call at the start of this month here. They followed that up in saying that markets should not expect continuous rate cuts. And that is precisely what is priced right now. Traders are only seeing ~36% odds of a rate cut in September. So, the inflation numbers this week could seal the deal for a no change decision.

To summarise, I wouldn’t underestimate the impact of the UK report for broader market sentiment. It could yet produce keep traders on edge in fear that the US numbers might also be sticky. Although, I doubt that will be the case. The disinflation process in the US is still ongoing, albeit very gradually. And this week’s numbers should stick with that trend and narrative. But we’ll see about that and stay mindful for any surprises that could come along the way.

This article was written by Justin Low at www.forexlive.com.

Fundamental
Overview

The losses peaked for the
Canadian Dollar last Monday as the volatility normalised, and we got some good
US data throughout the week. That helped to turn around the risk sentiment and
give the Loonie a boost.

The market has been slowly
paring back the aggressive rate cuts expectations for the Fed as now a 25 bps
cut in September is seen as more likely with a total of 98 bps of easing by
year-end. On the BoC side, the market is fully pricing a 25 bps cut in
September and a total of 73 bps of easing by year-end.

USDCAD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that USDCAD spiked above the 1.3860 resistance last Monday due to the global stock
market rout but eventually gave back all the gains as the mood in the market
improved.

The sellers piled in at
every break lower and extended the drop into the 1.3720 level. The natural
target should be the strong support zone around the 1.36 handle. The buyers, on
the other hand, will want to see the price breaking above the 1.3785 level again
to regain some control and position for new highs.

USDCAD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that the price is consolidating around the 1.3720 level. The sellers will
want to see the price breaking lower to increase the bearish bets into the 1.36
handle. The buyers, on the other hand, will likely keep on stepping in around
the lows with a defined risk below to position for a rally into a new cycle
high.

USDCAD Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that the recent price action formed a descending triangle. The price can
break on either side of the pattern but follows next is generally a more
sustained move in the direction of the breakout. The red lines define the average daily range for today.

Upcoming
Catalysts

Tomorrow we get the US PPI data. On Wednesday, we have the US CPI report. On
Thursday, we get the US Retail Sales and Jobless Claims figures. Finally, on
Friday, we conclude the week with the University of Michigan Consumer Sentiment
survey.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

The moves point to a further relaxing to the carry trade unwind as risk sentiment is keeping steadier. USD/JPY in particular is up 0.5% to 147.30 levels now but is keeping just near the topside of the recent bounce from last week:

It’s not much of a suggestion that we are due a stronger retracement after the sharp fall in July. But buyers are trying to wrestle back some near-term momentum at least. The slow grind higher on the session now sees price move back above its 200-hour moving average of 147.18. It is the first time in four weeks that price action is trading above the key near-term level.

So, that will be one to watch in trying to gauge sentiment in the pair over the next few sessions.

Besides that, USD/CHF is up 0.3% to 0.8680 and also pushing past the same key near-term level as per USD/JPY.

That suggests buyers are back in near-term control but it is still early days. That especially as market players are also going to be watching key US data in the days ahead for more clues.

The euro, sterling, and loonie are all little changed otherwise in the major currencies space. However, the aussie and kiwi are posting slight gains with AUD/USD up 0.4% to near 0.6600 and NZD/USD up 0.5% to 0.6025 currently.

In other markets, S&P 500 futures are up 0.1% while European indices have seen their early gains turn into marginal ones now. So, it’s not that straightforward to kick things off in the new week.

This article was written by Justin Low at www.forexlive.com.

UPCOMING
EVENTS:

• Tuesday: Australia Wage Price Index, UK Labour Market
  report, Eurozone ZEW, US NFIB Small Business Optimism Index, US PPI.
• Wednesday: RBNZ Policy Decision, UK CPI, US CPI.
• Thursday: Japan Q2 GDP, Australia Labour Market report,
  China Industrial Production and Retail Sales, UK Q2 GDP, US Retail Sales,
  US Jobless Claims, US Industrial Production and Capacity Utilisation, NAHB
  Housing Market Index.
• Friday: New Zealand Manufacturing PMI, UK Retail Sales,
  US Housing Starts and Building Permits, US University of Michigan Consumer
  Sentiment.

Tuesday

The Australian
Wage Price Index Y/Y is expected at 4.0% vs. 4.1% prior, while the Q/Q measure
is seen at 0.9% vs. 0.8% prior. The RBA stated that wage growth appeared to have peaked but it
remains above the level consistent with their inflation target.

The UK
Unemployment Rate is expected at 4.5% vs. 4.4% prior. The Average Earnings
Ex-Bonus is expected at 5.4% vs. 5.7% prior, while the Average Earnings incl.
Bonus is seen at 4.6% vs. 5.7% prior.

As a reminder, the
BoE cut interest rates by 25 bps at the last meeting bringing the Bank Rate
to 5.00%. The market is assigning a 62% probability of no change at the
upcoming meeting and a total of 43 bps of easing by year-end.

The US PPI Y/Y is
expected at 2.3% vs. 2.6% prior, while the M/M measure is seen at 0.2% vs. 0.2%
prior. The Core PPI Y/Y is expected at 2.7% vs. 3.0% prior, while the M/M
reading is seen at 0.2% vs. 0.4% prior. The market will focus more on the US
CPI release the following day.

Wednesday

The RBNZ is
expected to cut the Official Cash Rate by 25 bps to 5.25%. The market started
to price in a reduction at the upcoming meeting as the central bank leant to a
more dovish stance at its latest policy decision. In fact, the RBNZ stated that “the Committee
expected headline inflation to return to within the 1 to 3 percent target range
in the second half of this year” which was followed by the line “The
Committee agreed that monetary policy will need to remain restrictive. The
extent of this restraint will be tempered over time consistent with the
expected decline in inflation pressures”.

The UK CPI Y/Y is
expected at 2.3% vs. 2.0% prior, while the M/M measure is seen at -0.2% vs.
0.1% prior. The Core CPI Y/Y is expected at 3.5% vs. 3.5% prior. Softer figures
will likely increase the market’s expectation for a back-to-back cut in
September, but it’s unlikely that they will change that much given that we
will get another CPI report before the next BoE decision.

The US CPI Y/Y is
expected at 3.0% vs. 3.0% prior, while the M/M measure is seen at 0.2% vs.
-0.1% prior. The Core CPI Y/Y is expected at 3.2% vs. 3.3% prior, while the M/M
reading is seen at 0.2% vs. 0.1% prior.

This report
won’t change the markets expectations for a rate cut in September as that’s a given.
What could change is the difference between a 25 bps and a 50 bps cut. In fact,
right now the market is basically split equally between a 25 bps and a 50 bps
cut in September.

In case the data
beats estimates, we should see the market pricing a much higher chance of a 25
bps cut. A miss shouldn’t change much but will keep the chances of a 50 bps cut
alive for now.

Thursday

The Australian
Labour Market report is expected to show 12.5K jobs added in July vs. 50.2K in
June and the Unemployment Rate to remain unchanged at 4.1%. Although the labour
market softened, it remains fairly tight.

The RBA
delivered a more hawkish than expected decision last week which saw the market repricing rate cuts
from 46 bps to 23 bps by year-end. Unless we get big surprises, the data shouldn’t change much.

The US Retail
Sales M/M is expected at 0.3% vs. 0.0% prior, while the Ex-Autos M/M measure is
seen at 0.1% vs. 0.4% prior. The Control Group M/M is seen at 0.2% vs. 0.9%
prior. Although we’ve been seeing some softening, overall consumer spending
remains stable.

The US Jobless
Claims continue to be one of the most important releases to follow every week
as it’s a timelier indicator on the state of the labour market.

Initial Claims
remain inside the 200K-260K range created since 2022, while Continuing Claims have
been on a sustained rise showing that layoffs are not accelerating and remain
at low levels while hiring is more subdued.

This week Initial
Claims are expected at 235K vs. 233K prior, while Continuing Claims are seen at
1871K vs. 1875K prior.

This article was written by Giuseppe Dellamotta at www.forexlive.com.