• It would take a massive economic surprise for the ECB not to move in June
• Relatively comfortable with market pricing of rate cuts, no need to disturb that
• Rate cuts should be gradual and easiest to move at quarterly meetings when projections are released

They have been out in droves today to confirm a June rate cut. As for market pricing, it fits somewhat with what he is proposing as traders are pricing in ~71 bps of rate cuts for this year.

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

• Data released ahead of our next meeting will give clearer indication of how far along the „last mile“ we have come

The message remains the same in that they want to see more evidence that inflation persistence is easing before officially pivoting. There will be two more CPI reports before the June meeting – one next week on 22 May and the other on 19 June, just a day before the decision day.

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

Headlines:

• Dollar holds steadier as yields nudge back up a little
• What are the main events to look out for today?
• Fed’s Williams: Doesn’t see need for a rate cut in the near-term
• ECB’s de Cos: Every indicator points towards a first rate cut in June
• ECB’s Centeno: We have the expectation to start rate cuts in June
• Italy April final CPI +0.8% vs +0.9% y/y prelim
• China will always be a good friend and partner of mutual trust with Russia, says Xi
• Putin says partnership with China is an example of how relations should work

Markets:

• USD and JPY lead, AUD lags on the day
• European equities mildly lower; S&P 500 futures up 0.1%
• US 10-year yields down 1 bps to 4.346%
• Gold down 0.1% to $2,382.71
• WTI crude up 0.1% to $78.70
• Bitcoin up 0.3% to $66,181

There was no post-CPI follow through as markets took on a more tentative mood in European morning trade.

The dollar is sitting a little higher on the day, helped by a nudge higher in Treasury yields. 10-year yields fell to 4.31% early on but are now pushing back up above 4.34%, holding above its 200-day moving average of 4.33%. It’s a key juncture for bonds, as traders wait on the US weekly jobless claims next.

USD/JPY in particular recovered by 100 pips in a move from 153.90 to 154.90 currently. Meanwhile, EUR/USD and GBP/USD are both down 0.2% to 1.0864 and 1.2655 respectively.

As risk trades also did not see any follow through, the commodity currencies are also feeling a bit more shy for now. AUD/USD is down 0.3% to 0.6670, not helped by a softer Australian jobs report earlier. USD/CAD is up 0.2% to 1.3633, steadily gaining from a low of 1.3590 earlier in the day.

In the equities space, European indices are more tentative while US futures are also sitting little changed. That’s not helping much with the overall mood as we look to the session ahead.

It’s now over to see if the weekly jobless claims will spring up any surprises or if we are on the verge of a turnaround Thursday moment.

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

What is a Forex swap?

Swap
is a commission charged for carrying open positions overnight to the next
trading day in the Forex market. The exact moment when the swap is withdrawn
from your trading account depends on your broker. Most brokers charge it most
often between 11 p.m. and 12 a.m. server time.

The
Forex market is over-the-counter and non-deliverable, meaning you are not the
owner of the trading asset. In order not to cause the need for calculations,
the system automatically closes an open position on the current trading day and
opens it on the next one. Such closing is considered conditional, as the
position is carried over, and the swap is charged.

Depending
on the value of the swap and the position, the swap can be negative or
positive. In other words, you will either have to pay a commission or be paid a
commission for holding an open position overnight. This is because the margin
system used in Forex trading allows you to use the additional capital the
broker provides. You borrow funds to open a position from your broker.

There
is an opinion among traders that the Forex swap is nothing but a broker’s
commission. However, this is not true. Let’s find out how swaps work in the
Forex market.

How do swaps work in the Forex
market?

Every
time you open a position, you make two transactions: buying one and selling
another currency in a currency pair. So, you are essentially borrowing that
money to sell one of the currencies and need to pay interest on the borrowed
amount. However, in doing so, the currency you buy will earn you interest.

If
the base interest rate on the currency you buy is higher than the currency you
sell, you can earn interest on the difference in rates for carrying an open
position to the next day. However, given the broker’s markup, regardless of the
direction of the open position (buying or selling), you will have to pay a
commission.

Thus,
the value of a swap depends on the market and the instrument you are trading.
For example, the swap on the same EURUSD and USDJPY positions will differ.

The
value of swap varies depending on:

●
online broker

●
type of the position—Buy or Sell

●
type of the asset

●
number of days the position
remains open

●
nominal value of the position
(number of lots).

Why is there a triple swap?

Sometimes,
a swap is charged for holding an open position over the weekend, even if you
did not have it on Saturday and Sunday. Such a fee is called a triple swap.
Since the markets are closed on weekends, the triple swap was invented to
compensate for this and is charged either on Fridays or Wednesdays, depending
on the specific market.

This
is because orders are settled on the Forex market on the second working day
from the trade date (T+2). Since the value date falls on a weekend, the
transfer is made for three days at once (on Monday). Therefore, from Wednesday
to Thursday (at 12 a.m.), the swap is charged for the past weekend and
Wednesday.

In
other words, if you hold your position overnight when the triple swap is
applied, your order will be charged three times the standard swap.

Are there swap-free accounts?

To
make trading more convenient and accessible, many brokers have introduced the
concept of swap-free accounts.

Swap-free
accounts relieve the trader from the need to constantly monitor the size of
accounting rates on currencies in a currency pair, make trading more
straightforward, and allow taking into account in advance the commission for
the transfer of positions when calculating the financial result of planned
transactions. It is also relevant for those clients who cannot use swaps due to
religious beliefs. This determines the second name of this type of
account—Islamic accounts.

Charged
daily, the swap fee accumulates over time, making trading less favourable. To
enhance the investment opportunities of its customers, Octa has decided to
remove swap fees for all types of trading accounts. These fees will no longer
prevent traders from using medium- and long-term strategies in the financial
market. Now, they can keep that position open for as long as they see fit and
with no swap cost.

About Octa

Octa is an
international broker that has been providing online trading services worldwide
since 2011. It offers commission-free access to financial markets and various
services already utilised by clients from 180 countries with more than 42
million trading accounts. Free educational webinars, articles, and analytical
tools they provide help clients reach their investment goals.

The company is involved in a comprehensive network
of charitable and humanitarian initiatives, including the improvement of
educational infrastructure and short-notice relief projects supporting local
communities.

Octa has also won over 70 awards since its
foundation, including the ‚Best Educational Broker 2023‘ award from Global
Forex Awards and the ‚Best Global Broker Asia 2022‘ award from International
Business Magazine.

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

• Prefers a gradual rate cut path
• Inflation is falling and it is a sustained fall
• Decisions are taken meeting by meeting

Nothing surprising as Centeno just confirms a rate cut in June for starters.

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

Headlines:

• The pressure is on for the dollar with CPI in focus
• Bond yields feeling heavy ahead of key US data later
• ECB’s Müller: A June rate cut is very probable
• ECB’s Rehn: Rates can be cut if confidence on inflation progress continues to strengthen
• France April final CPI +2.2% vs +2.2% y/y prelim
• Eurozone Q1 GDP second estimate +0.3% vs +0.3% q/q prelim
• Eurozone March industrial production +0.6% vs +0.5% m/m expected
• US MBA mortgage applications w.e. 10 May +0.5% vs +2.6% prior

Markets:

• JPY leads, USD lags on the day
• European equities slightly higher; S&P 500 futures flat
• US 10-year yields down 3.1 bps to 4.413%
• Gold up 0.2% to $2,363.02
• WTI crude down 0.7% to $77.50
• Bitcoin up 1.3% to $62,445

It was a quieter session as markets are prepping for the US CPI showdown later in the day. Alongside that release, we will also get US retail sales so it is going to be a blockbuster event on the data front in US trading.

For now though, the dollar is taking on a more defensive positioning with yields also trending lower. As 10-year yields are down by over 3 bps to 4.413%, that is dragging the greenback lower across the board as well.

USD/JPY in particular fell off from 156.20 to 155.60 and is holding thereabouts now, down 0.5% on the day. European currencies are just mildly higher against the dollar but the antipodeans are keeping gains since Asia trading. AUD/USD is up 0.2% to 0.6640 and NZD/USD up 0.4% to 0.6060 currently.

In the equities space, European indices are keeping the optimism even as US futures are feeling rather muted. That’s a sign risk trades are not perking up just yet, but we’ll see what the main event later will bring.

We’re about 30 minutes away now. Strap yourselves in. It’s going to be an action-packed one in the session ahead.

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

Yesterday, the USD
weakened across the board following the US
PPI release where the data came in line with expectations. The reaction
showed that the market is eager to buy risk assets and that even little signs of better
inflation figures can trigger a positive risk sentiment.

This will be
important to remember in light of today’s US CPI report where in line or soft
figures will likely lead to more USD selling and strong risk-on sentiment.
Conversely, hot readings might have the opposite effect with the USD bid across
the board.

On the daily chart, we can see that USDCAD fell back to the key support zone around the 1.36 handle where we can find the confluence of the trendline and the 61.8% fibonacci retracement level. This is where the buyers have been piling in to position for a rally back into the cycle highs. The sellers will need a break to the downside supported by the fundamentals to reverse the trend and start targeting the 1.34 handle. The US CPI report today will likely set the trend for the next few weeks.

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

• Prior +2.6%
• Market index 198.1 vs 197.1 prior
• Purchase index 141.7 vs 144.2 prior
• Refinance index 499.9 vs 477.5 prior
• 30-year mortgage rate 7.08% vs 7.18% prior

Mortgage applications were at the margin higher in the past week, owing much to a jump in refinancing activity. That was offset by a fall in purchases activity, as the rate of the most popular US home loan eases slightly by 10 bps.

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

Different asset
classes respond in different ways to various fundamental developments. For example,
you can have short-term government bonds selling off because the central bank
is tightening monetary policy or an FX pair in an uptrend because the central
bank of the currency that is appreciating is raising interest rates while the
central bank of the currency that is depreciating is cutting rates. You can
also have different equity sectors performing differently depending on the
economic cycle.

When you build your
trading theses you should find a market where your idea can be expressed in the
best possible way giving you good asymmetric bets. This process will also keep you
disciplined as you will only look for the highest conviction trades and refrain
from taking positions just out of boredom. Remember your job is not to trade
but to make money.

For example, let’s
say that you have two central banks beginning to tighten their monetary policy.
You may have the relative FX pair just ranging and not giving you any clear
trade. What you can do though is trading the short-term government bonds as an
increase in interest rates will cause a sell-off in those securities. In this
way you reduce your risk and increase your overall chances of success.

With more
experience you’ll start to notice that when you have a high conviction in your
trade because you clearly see the reasons for taking a position, your
psychological pressure will be much lower compared to the times when you force
trades trying to outsmart the market. As the saying goes “when in doubt, stay
out”.

As you can see,
risk management can also come in the form of asset class selection. Even if you
only trade the FX market, you can still apply this concept by trading only the
pairs where you have lots of odds stacked in your favour by reducing the margin
of error.

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

BTCUSD Technical Analysis: Key Bullish Breakout Signals

Bitcoin (BTCUSD) recently demonstrated a notable bullish breakout after defending the crtical price level of the anchored VWAP – purple line shown in the below chart.

Technical setup

1. Bull Flag Pattern: The chart shows a well-defined yellow bull flag pattern. This continuation pattern indicates a pause in the prevailing uptrend, often leading to a breakout in the same direction.

2. Triple Bottom Formation: On March 20th, a triple bottom was identified, establishing a strong support level. This pattern further solidifies the bullish sentiment.

3. Breakout Confirmation: The breakout from the bull flag was confirmed as prices surged above the pattern, accompanied by increased volume. This breakout is a strong indicator of the continuation of the uptrend.

4. Anchored VWAP: The Anchored Volume Weighted Average Price (VWAP) was set at $61241, which has acted as a crucial support level post-breakout.

5. VWAP 1st Upper Standard Deviation: Watch $63388. where profit takers may sell some at the 1st upper deviation of that anchored VWAP.

Key Levels to Watch

• Support Levels: The immediate support lies at the anchored VWAP of $61241, followed by the triple bottom support level around $60711
• Resistance Levels: The breakout has set new short-term resistance at the recent highs around $62713 and $63388 after that. A sustained move above this level could pave the way for further gains.

Market Sentiment and Performance

• Volume and Trading Activity: The volume has shown a marked increase during the breakout, reinforcing the validity of the move. Monitoring the trading volume is crucial for confirming future price movements.
• Performance Metrics: Bitcoin has shown a notable recovery with a daily increase of 1.91%, and the year-to-date performance stands at an impressive 128.06%.

The recent technical rebound in BTCUSD suggests a bullish continuation pattern, supported by the bull flag breakout and triple bottom formation. Traders should keep an eye on key support and resistance levels and monitor the anchored VWAP for potential entry and exit points. With a robust performance and increasing volume, Bitcoin remains an attractive asset for both traders and investors looking to capitalize on its upward momentum.

Stay updated with ForexLive.com for more in-depth analysis and trading insights on Bitcoin and other cryptocurrencies. TRADE BITCOIN AT YOUR RISK ONLY.

This article was written by Itai Levitan at www.forexlive.com.