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EUR/USD, USD/JPY Ready for Yellen, Draghi Jackson Hole Speeches

Talking Points:

- Below 1.3335, EURUSD is exposed to 1.3095.

- If rejected at 103.85/90, USDJPY needs to hold 103.05/10.

- US Dollar strength in August shouldn’t surprise – it’s a seasonally strong month.

With no Wall Street economists invited to this year’s Jackson Hole Economic Policy Symposium, market participants widely expect that the high-minded conference will take on a more academic tone.

Considering that the main focus of the conference is labor market recovery, the context of current times – traders waiting with baited breath for each Nonfarm Payrolls report – there is still significant scope for Fed Chair Yellen’s speech to make waves in markets.

With the unemployment rate at 6.2% after having been as low as 6.1% in June, the U3 rate is on track to meet or beat the Fed’s expectations. Claims continue to drop, and quit rates are at their highest levels in five years. On the contrary, long-term unemployment an issue and wage growth exceptionally weak.

In conjunction with signs of other major economies starting to flail (all of Europe, Japan) and rising geopolitical concerns that could act as a coolant to risk appetite or even global trade, Chair Yellen is likely to embrace a dovish tone today, highlighting the underutilization of the US labor markets.

EUR/USD, USD/JPY Ready for Yellen, Draghi Jackson Hole Speeches

US yields have been falling for some time now and the yield curve has undergone quite a bit of flattening this year (the 2s10s spread has narrowed from +264.8-bps on December 31, 2013 to +192.0-bps today), showing the market has fallen in step with the Fed’s demands for lower yields for longer.

Any hint of a pivot away from this ultra accommodative stance and towards and accelerated rate hike schedule could easily spook the markets.

See the technical video for considerations specifically for EURUSD, USDJPY, and USDCAD.

Read more: EUR/USD Slide Continues but EUR Weakness Elsewhere Questionable

— Written by Christopher Vecchio, Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher’s e-mail distribution list, please fill out this form

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USD/CAD to Eye Downside Targets on Sticky Canada Core Inflation

- Canada Headline Inflation to Hold Above 2.0% for Fifth Consecutive Month.

- Core Consumer Price Index of 1.9% Would Mark Fastest Pace of Growth Since June 2012.

Trading the News: Canada Consumer Price Index (CPI)

Despite expectations for a downtick in Canada’s Consumer Price Index (CPI), the stickiness in core inflation may spur a larger decline in the USD/CAD as it puts increased pressure on the Bank of Canada (BoC) to move away from its neutral policy stance.

What’s Expected:

USD/CAD CPI

Click Here for the DailyFX Calendar

Why Is This Event Important:

Even though BoC Governor Stephen Poloz talked down the risk for higher interest rates, the growing risk for a prolonged period of above-target inflation may push the central bank to adopt a more hawkish tone for monetary policy in an effort to promote price stability.

For more updates, sign up for David’s e-mail distribution list.

Expectations: Bullish Argument/Scenario

The pickup in private sector consumption may heighten price pressures in Canada, and a strong inflation print may spur a more meaningful correction in the USD/CAD as it boosts interest rate expectations.

Risk: Bearish Argument/Scenario

Nevertheless, slowing wage growth paired with the ongoing weakness in private lending may spur a softer-than-expected CPI print, and a marked slowdown in price growth may trigger a more meaningful run at the 1.1100 handle as it dampens bets for higher interest rates.

How To Trade This Event Risk(Video)

Bullish CAD Trade: Core Inflation Expands 1.9% or Higher

  • Need red, five-minute candle following the CPI report to consider short USD/CAD entry
  • If the market reaction favors a bullish Canadian dollar trade, establish short with two position
  • Set stop at the near-by swing high/reasonable distance from cost; use at least 1:1 risk-to-reward
  • Move stop to entry on remaining position once initial target is hit, set reasonable limit

Bearish CAD Trade: CPI Report Falls Short of Market Forecast

  • Need green, five-minute candle following the release to look at a long USD/CAD trade
  • Carry out the same setup as the bullish loonie trade, just in the opposite direction

For LIVE SSI Updates Ahead of Canada’s Inflation Report, Join DailyFX on Demand

Potential Price Targets For The Release

USD/CAD Daily

USD/CAD Daily Chart

Chart – Created Using FXCM Marketscope 2.0

  • Despite bullish break in RSI, downside remains favored given series of lower highs & lows.
  • Interim Resistance: 1.1000 (38.2% retracement) to 1.1020 (23.6% retracement)
  • Interim Support: 1.0820 (61.8% retracement) to 1.0830 (61.8% retracement)

Read More:

Make or Break Time for USDCHF- Rally Vulnerable Sub 9133

Price & Time: NOK Bucks the Trend

Impact that the Canada CPI report has had on CAD during the last month

June 2014 Canada Consumer Price Index (CPI)

USD/CAD Chart

The annualized inflation rate hit a two-year high of 2.4%, beating an average estimate of 2.3%. The core Consumer Price Index (CPI) reading also exceeded market forecast and climbed 1.8% after expanding 1.7% in May. Bank of Canada Governor Stephen Poloz stressed that the faster rate of price growth was mainly due to transitory factors, including energy and import costs, and expects inflation to slow over the next two years as the central bank retains a “neutral” view for monetary policy. The Canadian dollar jumped following the better-than-expected print, with USD/CAD dipping below the 1.0710 handle. After a quick comeback, the pair moved sideways during the rest of the North American trade and closed at 1.0727.

— Written by David Song, Currency Analyst and Shuyang Ren

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

To be added to David’s e-mail distribution list, please follow this link.

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Gold Braces For Volatility Ahead of Yellen, Crude Oil Consolidates

Talking Points

  • Crude Oil Drifting As Traders Look Past Iraqi Turmoil
  • Precious Metals Prep For Volatility On Jackson Hole
  • Silver At A Crossroads Near Trendline Resistance

Crude oil is treading water during the Asian session with a lack of major catalysts ahead potentially setting the commodity up for a period of consolidation. Meanwhile, gold and silver are mounting a small recovery with traders likely repositioning themselves ahead of the parade of speeches by central bankers at Jackson Hole.

Crude Drifting As Traders Look Past Iraqi Turmoil

WTI managed a small corrective bounce during trading on Thursday which likely reflected profit-taking on short positions. The commodity was likely overdue for a slight recovery given the speed and magnitude of recent declines. Yet with traders discounting the potential for supply disruptions due to geopolitical turmoil the fuel to sustain a recovery may be lacking.

Precious Metals Prep For Volatility On Central Banker Summit

Gold and silver remain in a precarious position as traders look past tensions in Eastern Europe, which in turn threatens to sap safe-haven demand for the alternative assets. This leaves hopes for a recovery to hang on the prospect of dovish remarks from Fed Chair Janet Yellen at her upcoming Jackson Hole address.

The central banker is set to deliver remarks on the labour market. A reiteration of strong concerns over persistent weakness in wage growth and underemployment would reinforce the prospect that US rates will remain at record lows over the near-term, which in turn is a negative for the USD.

Gold Braces For Volatility Ahead of Yellen, Crude Oil Consolidates

CRUDE OIL TECHNICAL ANALYSIS

Crude is threatening a corrective bounce following the emergence of a Harami candlestick pattern on the daily. Yet odds of a more sustained recovery remain stacked against the commodity. This is in light of the sustained downtrend made evident by the descending trendline and prices holding below the 20 SMA. Sellers are likely to re-emerge at the 95.00 handle, which may offer a fresh entry into new short positions. A daily close above the trendline barrier would likely be required to signal the possibility of a more sustained shift in sentiment.

Crude Oil: Recovery May See Sellers Emerge At 95.00

Gold Braces For Volatility Ahead of Yellen, Crude Oil Consolidates

Daily Chart – Created Using FXCM Marketscope 2.0

GOLD TECHNICAL ANALYSIS

Downside risks remain for gold following the crack of key support at 1,280. This may set the precious metal up for a run on the 1,241 floor with reversal signals seemingly lacking. However, a multi-month low for the ATR warrants some skepticism over a sustained decline, given anemic volatility readings generally do not support breakouts.

The DailyFX SpeculativeSentimentIndex suggests a bearish bias for gold based on trader positioning.

Gold: Crawl Under 1,280 Opens Knock On June Lows

Gold Braces For Volatility Ahead of Yellen, Crude Oil Consolidates

Daily Chart – Created Using FXCM Marketscope 2.0

SILVER TECHNICAL ANALYSIS

A descending trendline on the daily continues to keep silver in check as the precious metal descends towards the 19.00 target. Sustained negative momentum reflected by the Rate of Change indicator supports the potential for further weakness. While an ensemble of Dojis suggests some hesitation from traders, key reversal patterns remain lacking.

Silver: March Towards $19.00 Target Slows

Gold Braces For Volatility Ahead of Yellen, Crude Oil Consolidates

Daily Chart – Created Using FXCM Marketscope 2.0

COPPER TECHNICAL ANALYSIS

Copper has vaulted over the critical 3.19 hurdle which may open the door to a retest of the base metal’s recent highs. The reversal follows a Bullish Engulfing formation which helped to signal a shift in sentiment for the commodity.

Copper: Sentiment Shifts As Hurdle Cleared

Gold Braces For Volatility Ahead of Yellen, Crude Oil Consolidates

Daily Chart – Created Using FXCM Marketscope 2.0

PALLADIUM TECHNICAL ANALYSIS

Palldium’s core uptrend remains intact following a rebound from the 200 SMA and 861 barrier. This casts the spotlight back to the metal’s recent highs at the critical 900 ceiling. A break of the ascending trend channel would be required to warn of a top.

Palladium: Rebounds With Core Uptrend Intact

Gold Braces For Volatility Ahead of Yellen, Crude Oil Consolidates

Daily Chart – Created Using FXCM Marketscope 2.0

PLATINUM TECHNICAL ANALYSIS

An absence of bullish reversal signals and presence of a sustained downtrend for Platinum may yield further declines for the commodity. A daily close below the 1,424 floor opens a knock on the 1,395 barrier. However, after ten straight days of declines a corrective bounce seems overdue at this point. A more sustained recovery would require a leap over the descending trendline.

Platinum: Targeting 1,395 With Bearish Signals Intact

Gold Braces For Volatility Ahead of Yellen, Crude Oil Consolidates

Daily Chart – Created Using FXCM Marketscope 2.0

Written by David de Ferranti, Currency Analyst, DailyFX

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Contact and follow David on Twitter: @DaviddeFe

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Jackson Hole Symposium: Scenarios for the Dollar vs. Major Currencies

Talking Points:

  • Markets Brace for Impact as Central Bank Top Brass Gather in Jackson Hole
  • Pound Most Prone to Big-Splash Volatility After Weeks of Aggressive Selling
  • Follow the Kansas City Fed Symposium on the DailyFX Real Time News Feed

A lull in fundamental event risk in Asia and Europe has left currency markets rudderless, with investors looking ahead to the Kansas City Federal Reserve Economic Symposium getting underway today in Jackson Hole, Wyoming. The annual gathering is a star-studded affair this time around, with the keynote speech to be delivered by Fed Chair Janet Yellen and scheduled appearances from ECB President Mario Draghi, BOJ Governor Haruhiko Kuroda, BOE Deputy Governor Ben Broadbent and BOC Governor Steven Poloz.

A gathering of so many policy heavy-hitters in one place all but guarantees that someone will invariably say something market-moving at some point before the affair is through. Needless to say, traders will be all ears. While it is impossible to precisely predict just what will be said and how it might impact exchange rates, filtering the established trajectory of monetary policy in the world’s leading economies through recent price action offers a useful layout of the probable scenarios.

The top four central banks can be grouped into two camps: those inching toward reducing stimulus and those that might expand it. The Fed and the BOE are in the former camp, while the BOJ and the ECB are in the latter.

While the US Dollar trades near a six-month high, the British Pound is working on the seventh consecutive week of losses. This means that for the greenback, there is confluence between overall direction of policy (i.e. a movement away from the dovish extreme of the policy spectrum via “tapering” of QE asset purchases) and the latest price action. Not so for Sterling: continued selling stands in contrast to seemingly supportive news-flow by way of a relatively hawkish set of minutes from Augusts’ policy meeting.

Central bankers are a stolid bunch and typically try to avoid bombastic rhetoric that might spook the markets, particularly at a wonky get-together like the Jackson Hole Symposium. That means Ms Yellen and her counterparts will probably seek to stay relatively “on-message” vis-à-vis existing policy trends.

This hints that the risk of big-splash volatility is comparatively lower for the US unit, where prices have already moved in a significant way to reflect the cautiously hawkish implications of recent developments. Similarly status-quo remarks from the BOE contingent would clash with recent Pound moves, meaning the threat of a sharp rebound may be asymmetrically greater than that of another big push downward.

Turning to the dovish grouping, the BOJ Governor seems less likely than otherwise to deliver another aggressive decline in the Japanese Yen considering prices plunged to five-month lows just this week. If a big swing in the exchange rate is to materialize, it seems disproportionately probable that such a move would take the currency higher. The same goes for the Euro after the single currency sank to an 11-month low.

New to FX? START HERE!

Asia Session

European Session

Critical Levels

— Written by Ilya Spivak, Currency Strategist for DailyFX.com

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Contact and follow Ilya on Twitter: @IlyaSpivak

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Dollar Rally Cools Before Janet Yellen Takes the Stage at Jackson Hole

Talking Points:

  • Dollar Rally Cools Before Janet Yellen Takes the Stage at Jackson Hole
  • Euro: Will Draghi Comment on the Asset Purchase Program, Currency?
  • British Pound Suffers 7-Week Slide – Longest in Decades

Dollar Rally Cools Before Janet Yellen Takes the Stage at Jackson Hole

After two strong days of rally, the US Dollar took a breather Thursday. This market certainly wasn’t wanting for fundamental encouragement. However, with the intensified scrutiny and market sensitivity to rate speculation as of late, Fed Chairwoman Janet Yellen’s scheduled speech Friday was reason enough for bulls to take some profit and risk off the table. For performance, the dollar eased back against most of its major counterparts this past session and the Dow Jones FXCM Dollar Index (ticker = USDollar) posted a hearty intraday reversal. Meanwhile, the S&P 500 was unencumbered by the sense of hesitation as it marched to a record high and its VIX Volatility Index slipped back below 12 – an extreme low. While a record high in this speculative barometer is presumptuous, its climb was not as dramatic as the dollar’s.

Setting the tone for what lies ahead, the US event risk was encouraging this past session. Data-wise, Markit’s manufacturing activity report for August was sharply better than expected and a series high, while existing home sales hit a 10-month high. More on pace with what traders have been keeping tabs on, the unscheduled Fed commentary the Thursday took a notably hawkish timbre. The most reserved of the three speakers, John Williams said a Summer 2015 rate hike forecast was reasonable. A known hawk, Esther George (host of the Jackson Hole Symposium as the Kansas City Fed President) stepped it up by remarking that some measures suggested rates should already be higher. Charles Plosser took it further by repeating waiting too long to remove accommodation could have “dire” consequences. Chair Yellen is unlikely to share the fervor of her colleagues, but there has been a notable shift in the broader FOMC view towards hawkishness. As the central bank’s figure head, her comments could carry far more weight – especially if hawkish.

Euro: Will Draghi Comment on the Asset Purchase Program, Currency?

The Euro wasn’t putting up a particularly strong move one way or the other this past session. Extending a theme of dampening its reaction to disappointing fundamental updates, the currency was little moved in the wake of the August PMI figures. While both Germany and France – which offered troubling 2Q GDP updates last week – showed improvement for the month, the broader Eurozone measure slipped. Similarly discouraging, the Euro-area consumer sentiment survey extended its reversal from 7-year highs. Friday, we will see whether ECB President Draghi is taking weak growth readings to heart in his speech. Will he mention the asset purchase program option or the Euro?

British Pound Suffers 7-Week Slide – Longest in Decades

Unless the British Pound can rally over 110 points against the Dollar through the final trading session of the week, GBPUSD will end the week with yet another loss. That would make 7 consecutive weeks of decline – matching (June 2005 and August 2008) the longest period of retreat in decades. For scheduled event risk through the final trading session this week, there is rather little on the docket besides a speech expected from the BoE’s Broadbent on Saturday. Yet, in the absence of high-level drivers, there is a growing potential for the sterling to regain some traction after its aggressive decline on the sharp interest rate speculation retrenchment.

Yen Crosses Bounce Venturing into Necessary Trend Area

A rebound from the Yen crosses is not particularly shocking given the rebound in global equities this past week. However, the low hanging fruit for stocks and carry pairs have been more-or-less exercised. For stocks, that is seen in the return to near-record lows in volatility measures. For the yen pairs, we have similar implied volatility readings we can defer to, but it is also just as prominent in the market’s technical bearings. Pairs like USDJPY stand on the cusp of the next leg of the bull trend from the third quarter of 2012. The question bulls must ask themselves is whether there are the conditions and will to bid carry trade to significantly higher levels. Yields and economic conditions cloud that view.

Australian and New Zealand Dollars – An End of Yield Speculation Adjustment?

The New Zealand dollar has dropped nearly 500 pips from its high and 12-month rate forecasts have dropped over 100 bps over the months. Meanwhile, the tentative advance from the Australian dollar and the local yields these past weeks has stalled. These corrections are materially different, but they lead to the same consideration: how far do rate forecasts correct, especially when these carry currencies are so far up the curve? Anecdotally this morning, demand for a three-year Aussie bond auction was the strongest in a decade.

Emerging Markets Slip Second Day, World’s Largest SWF Slows Investment

From its lowest of 2014 – set in January – the MSCI Emerging Market ETF is currently up 21 percent. Meanwhile, shares outstanding as a measure of demand is 32 percent above its own low for the year. That looks impressive until we put both into perspective. Price is still within a broader range from the past years and interest is peaking well below highs from the previous three years. Doubt is creeping in. In fact, this past session, Norway’s Sovereign Wealth Fund – the world’s largest – announced that it was slowing its investment into EM.

Gold’s Five-Day Decline Matches Longest in 9 Months

With Thursday’s 1.2 percent decline – the largest in five weeks – gold has extended a selloff to five consecutive days. This matches the worst tumble the metal has suffered since November. This is a hefty move and the event risk ahead is temptingly threatening to this alternative store of wealth and inflation hedge. What will Janet Yellen and Mario Draghi says? Can they stoke demand for the precious metal or perhaps they will draw the focus onto yields and away from gold. Volume jumped this past session, suggesting traders are readying themselves.

**Bring the economic calendar to your charts with the DailyFX News App.

ECONOMIC DATA

SUPPORT AND RESISTANCE LEVELS

To see updated SUPPORT AND RESISTANCE LEVELS for the Majors, visit Technical Analysis Portal

To see updated PIVOT POINT LEVELS for the Majors and Crosses, visit our Pivot Point Table

CLASSIC SUPPORT AND RESISTANCE

INTRA-DAY PROBABILITY BANDS 18:00 GMT

v

— Written by: John Kicklighter, Chief Strategist for DailyFX.com

To contact John, email jkicklighter@dailyfx.com. Follow me on twitter at http://www.twitter.com/JohnKicklighter

Sign up for John’s email distribution list, here.

The information contained herein is derived from sources we believe to be reliable, but of which we have not independently verified. Forex Capital Markets, L.L.C.® assumes no responsibility for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person’s reliance upon this information. Forex Capital Markets, L.L.C.® does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. Forex Capital Markets, L.L.C.® shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation losses, lost revenues, or lost profits that may result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results.

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EUR/USD Vulnerable to Dovish Draghi- USD/JPY Carving Doji?

Talking Points:

- EUR/USD to Target 1.3200-20 on Dovish Comments From ECB President Mario Draghi

- USD/JPY Stalls Ahead of 104.00; Doji Warns of Waning Momentum

- USDOLLAR Risks Larger Decline Ahead of Fed Symposium as RSI Stalls at 78 Resistance

For more updates, sign up for David’s e-mail distribution list.

EUR/USD

EUR/USD Vulnerable to Dovish Draghi- USD/JPY Carving Doji?

  • Despite marking a fresh monthly low of 1.3240, the Relative Strength Index (RSI) appears to be carving a higher-low; European Central Bank (ECB) President is scheduled to speak at the Fed Symposium on Friday at 18:30 GMT.
  • More dovish comments from the ECB raises the risk for a further decline and may generate a move into 1.3200 (100% expansion) to 1.3220 (61.8% retracement).
  • The DailyFX Speculative Sentiment Index (SSI) continues to show retail crowd remains net-long on the EUR/USD as the ratio stands at +1.79.

USD/JPY

EUR/USD Vulnerable to Dovish Draghi- USD/JPY Carving Doji?

  • Struggles to test the April high (104.11) despite the first overbought RSI reading since December; may face a near-term pullback should the oscillator slip below 70.
  • At the same time, if a doji materializes on the USD/JPY, could warn of a larger correction as it straddles channel resistance.
  • Nevertheless, we will retain our approach to ‘buy dips’ in the USD/JPY as it carves a new series of higher highs & lows.

Join DailyFX on Demand for Real-Time SSI Updates Across the Majors!

Read More:

Price & Time: NOK Bucks the Trend

EUR/USD Slide Continues but EUR Weakness Elsewhere Questionable

USDOLLAR

EUR/USD Vulnerable to Dovish Draghi- USD/JPY Carving Doji?

EUR/USD Vulnerable to Dovish Draghi- USD/JPY Carving Doji?

Chart – Created Using FXCM Marketscope 2.0

USDOLLAR(Ticker: USDollar):

  • Dow Jones-FXCM U.S. Dollar Index climbs to a fresh monthly high of 10,616 after closing above the key 10,590 pivot, with the RSI pushing back into overbought territory.
  • May see former support (10,615) act as new resistance, especially if the Federal Open Market Committee (FOMC) Minutes fail to prop up interest rate expectations.
  • Need a bearish break in the RSI to look for a more meaningful USDOLLAR correction.
  • Interim Resistance: 10,602 (38.2% retracement) to 10,615 (78.6% expansion)
  • Interim Support: 10,440 (78.6% retracement) to 10,450 Pivot

Join DailyFX on Demand for Real-Time SSI Updates!

Click Here for the DailyFX Calendar

— Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

To be added to David’s e-mail distribution list, please follow this link.

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