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EarnForex.com Monthly Newsletter
| | | | Welcome to the latest issue of EarnForex.com newsletter — September 2016. In this issue of EarnForex.com newsletter, I will remind you about the most important Forex-related events of the last month and will also show you the list of the site's latest updates. | | When you trade Forex on margin, you borrow the quote currency and hold the base currency (when selling, it is vice versa). Borrowing and holding incurs interest payments. Normally, you would get the difference between the interest rate associated with the long side currency and the interest rate of the short side currency. If the difference is negative, you would be paying interest to your broker. If it is positive, you get paid for holding a position. Such payments are called swaps. Unfortunately for traders, brokers apply spreads on their swaps. Long/short spread reduces the size of the swaps. For example, the current interest rate in the eurozone is 0%; in Canada, it is 0.50%. Without spreads, you would earn 0.50% annually by going short EUR/CAD and you would be charged 0.50% per year for holding a long EUR/CAD position — being both short and long positions should converge to a zero interest rate. However, the swap spread makes it worse in practice. AvaTrade, a popular ASIC-regulated broker, charges 0.2% for EUR/CAD shorts and 2.1% on EUR/CAD longs. As you can see, there is 2.3% spread on this swap. With InstaForex, an offshore broker popular in Asia, you get paid 3 fractional pips for holding short EUR/CAD trade and you pay 4.5 fractional pips for a long trade in this pair. At current exchange rates, this translates into $3 CAD per lot vs. -$4.5 CAD per lot, which is roughly 0.7% vs. -1.1% and means a spread value of about 0.4%. Obviously, swap spreads is another parameter to choose your Forex broker. It will affect your profit unless you are trading purely intraday. There are many services for swaps comparison available online. Swap spread is especially worth optimizing when you are about to enter a big long-term trade. | | Overview of the major currency pairs' performance in August | | EUR/USD — ended month near its opening level having fallen and then risen significantly during the period. It was at the maximum at 1.1366 on August 18, at its minimum at 1.1045 on August 5, finishing the month at 1.1157. GBP/USD — fell during the first half of August but then recovered nearly all losses. The highest monthly rate was at 1.3371 on August 3, while the lowest — at 1.2865 on August 15. GBP/USD finished August trading at 1.3134. USD/JPY — declined during first two decades of the month but then rose above the opening level. The pair rose to as high as 103.53 on August 31, reaching a bottom at 99.52 on August 16 and closing the month with the 103.42 rate. EUR/JPY — was almost flat during first two thirds of August with a strong rally during the final days. The monthly high was at 115.43 on August 31, the monthly low — at 112.31 on August 5. Trading ended at 115.38 for this currency pair. GBP/JPY — demonstrated nearly perfect parabola in August. The maximum level for this pair was 136.25 on August 1, while the minimum — 129.14 on August 16. The month's trading ended at 135.83 for GBP/JPY. | | Fundamental background of the past month | | The US dollar had a good start in August with surprisingly solid nonfarm payrolls. Yet the main factor driving the currency was the monetary policy outlook. While the Federal Reserve policy minutes were not as hawkish as dollar bulls had hoped for, comments from policy makers, Janet Yellen in particular, fed hopes for an early interest rate hike and thus the strength of the greenback. The euro was mixed as talks about the need for reforms of the eurozone made the future of the shared 19-nation currency uncertain while traders were waiting for more data and hints whether the European Central Bank is going to add more stimulus or wait a little longer, assessing the economic situation in the region. The Japanese yen had plenty of negative factors to drag it down (though it performed not that bad all things considered). Among them were stagnating economic growth, falling consumer prices, and prospects for monetary stimulus from the Bank of Japan. The Great Britain pound was a good performer in August as the slew of positive economic indicators suggested that the fallout from the Brexit is not hurting Britain's economy that much (though there were speculations that this may change when the United Kingdom proceeds with its separation from the European Union). The Canadian dollar did not perform that well due to somewhat weak economic data and struggling crude oil prices. The Australian dollar fared a bit better despite the interest rate cut by the Reserve Bank of Australia. The Reserve Bank of New Zealand made the same move, but the New Zealand dollar fared even better than its Australian counterpart, rallying after the rate cut. The currency got further support from comments made by RBNZ Governor Graeme Wheeler, who indicated that he is not going to ease monetary policy too fast. Unsurprisingly, the strong dollar and the prospects for a rate hike from the Fed made August pretty miserable for gold. | | Interest rate changes in August | | Australia | 1.75% | -0.25% | 1.50% | | Iceland | 7.50% | -0.50% | 7.00% | | New Zealand | 2.25% | -0.25% | 2.00% | | Turkey | 8.75% | -0.25% | 8.50% | | United Kingdom | 0.50% | -0.25% | 0.25% | You can see the current interest rates by the world's central banks in our interest rate table. | | Top 5 Forex brokers of the last month | | Two new Forex brokers have been added to EarnForex.com since the last issue of the newsletter: - JFD Brokers — a CySEC regulated company with offices in Cyprus, Bulgaria, and Germany. They offer MT4 accounts with $500 minimum and 1:400 maximum leverage. Multiple trading instruments are at the clients' disposal.
- BDSwiss — a regulated Cypriot company with $200 minimum account size and 1:400 maximum leverage on Forex. The only trading platform offered is MetaTrader 4.
You can always view our full list of Forex brokers. | | One new Forex VPS provider has been added to EarnForex.com since the last issue of the newsletter: - HostingStak — an Italian hosting provider with Forex VPS starting at €24.99/month.
You can always browse the previously added VPS companies. | | There were the following important Forex industry news since the last issue of the newsletter: - Mayzus Forex broker changed its name to Liteforex (Europe). Trading conditions remain the same.
- Interactive Brokers stopped accepting retail US traders due to the new US regulatory restrictions.
- Belgian market regulator FSMA banned trading in leveraged financial instruments, including Forex, binary options, and CFDs for retail traders.
- US regulator CFTC charged FXCM with undercapitalization, failure to timely report its undercapitalization violation, and guaranteeing against customer losses — all connected to the January 2015 Swiss franc volatility, which apparently, cost FXCM $200 million.
- RoboForex now accepts deposits via Bitcoin.
- Cyprus regulator CySEC fined the parent company of HotForex broker for €105,000 for misleading potential customers about the risks associated with trading.
- BIS has released its 2016 Triennial Report on Forex highlighting the major developments in the currency market.
| | Until the next newsletter issue! | | That is all for the September issue of the EarnForex.com newsletter. If you have questions, comments or just want to see something else in the next monthly issue, please let us know. | | |
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