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Tuesday, May 1, 2018

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EarnForex.com Monthly Newsletter
May 1st, 2018

Welcome to the latest issue of EarnForex.com newsletter — May 2018.

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.

EDITORIAL: Preparing for ESMA Forex Rules 📜

As you may have already heard, the pan-European financial regulator, the European Securities and Markets Authority (ESMA), has approved new much stricter rules on Forex trading back in March. The new rules will affect you if you are based in the EU or if you are a non-EU resident trading through a European broker. They can be summarized as follows:

  • Maximum leverage can be no higher than 1:30 for the major currency pairs and no more than 1:2 on such instruments as cryptocurrencies.
  • Margin close-out on a per account basis vs. per position basis.
  • Negative balance protection on a per account basis vs. per customer basis.
  • Ban on Forex bonuses.
  • Ban on binary options.
  • Standardized risk warning.

These ESMA rules have yet to come into play though. The binary options ban will start 1 month from the date of publication in the Official Journal of the European Union. CFD/Forex restrictions will start to apply after 2 months from the same date. Considering that the new measures have not yet been published officially (their translation into all EU languages is currently underway), you still have at least 2 months to continue trading with the European brokers as you used to do.

After that time, you will have three options:

  1. Adapt to the new rules, cutting down on the leverage and excluding some trading instruments from your strategy.
  2. Switch to an offshore broker. Some EU brokers already operate separate entities in less restrictive regulatory environments to offer better trading conditions to their customers. Unfortunately, there is a possibility that EU brokers will not allow EU residents to open account with these offshore companies.
  3. Change your status with your broker from a retail customer to an elective professional client as outlined in the MiFID II. This involves a test of expertise, experience, and knowledge of the trading activities you are going to participate in and some extra paperwork. In addition, you have to fulfill at least two of the following three conditions:
    • At least 10 trades per quarter over the previous four quarters.
    • Total size of financial instrument portfolio is over €500,000.
    • Work experience of at least 1 year in a professional position in the financial sector.
    The new rules apply only to retail customers, so being an elective professional client lets you and your broker ignore them. Unfortunately, by categorizing yourself as an elective professional client, you also waive all your rights as a retail customer, including protection by regulatory authorities and the retail account compensation schemes.

After the new rules come into force, they will first apply only for 3 months. But there is little doubt that the measures will be renewed for a new term.

Overview of the major currency pairs' performance in April

EUR/USD — after an initial bump, the currency pair entered a downtrend. It was at the maximum at 1.2413 on April 17, at its minimum at 1.2055 on April 27, finishing the month at 1.2078.

GBP/USD — though the pair rose during the first half of April, the ensuing decline in the second half was much stronger. The highest monthly rate was at 1.4376 on April 17, while the lowest — at 1.3712 on April 30. GBP/USD finished April trading at 1.3762.

USD/JPY — was in a strong uptrend in April. The pair rose to as high as 109.53 on April 27, reaching a bottom at 105.65 on April 2 and closing the month with the 109.32 rate.

EUR/JPY — rose during most of the month but declined somewhat during the final days. The monthly high was at 133.48 on April 24, the monthly low — at 129.97 on April 2. Trading ended at 132.03 for this currency pair.

GBP/JPY — was in an uptrend during the first half of April and lost nearly all its gains during the second one. The maximum level for this pair was 153.84 on April 13, while the minimum — 148.37 on April 2. The month's trading ended at 150.41 for GBP/JPY.

Fundamental background of the past month

The US dollar had some troubles at the beginning of April, largely due to the threat of trade wars between the United States and its trading partners, most notable of them being China. Yet as fears of trade wars were subsiding and US Treasury yields were surging, the currency quickly recovered. But the most important factor for the greenback seems to be the outlook for an interest rate hike by the Federal Reserve in June, which made the dollar one of the best performing currencies in April.

The euro's performance was also largely hanging on the monetary policy outlook, more specifically on timing and pace of quantitative easing tapering by the European Central Bank. At first, a hawkish speech from the ECB President Mario Draghi reinforced the view that the central bank will start to taper its stimulus in September. Yet a bunch of weak macroeconomic reports from eurozone made market participants question such outlook. Additionally, markets were confused as to how to interpret the statement made by Draghi after the April policy meeting, resulting in significant volatility of the euro.

Weak macroeconomic data also hurt the Great Britain pound as it cast doubt on chances for an interest rate hike from the Bank of England in May. And surprisingly slow economic growth basically squashed such chances.

The Japanese yen started the month strong thanks to the trade war threat, but end it very soft as fundamentals did not look good.

The Swiss franc continued to underperform, especially as Swiss National Bank Chairman Thomas Jordan said he sees no reason to unwind unprecedented monetary stimulus despite EUR/CHF touching the psychologically important 1.20 level.

The Canadian dollar started April very strong with the help of optimism about NAFTA negotiations and continued to demonstrate a very good performance, supported by a strong rally of crude oil.

The Reserve Bank of Australia showed no intention to start raising interest rates in the near future, and that was negative to the Australian dollar. Furthermore, Aussie often felt weight of disappointing macroeconomic data, both domestic and from Australia's biggest trading partner - China.

The strength of the US dollar resulted in a weak performance of gold in April.

Interest rate changes in March

There were no changes to the main interest rates from the major central banks in April.

You can see the current interest rates by the world's central banks in our interest rate table.

Forex guides

One new Forex guide has been published on EarnForex.com since the last issue of the newsletter:

You can always browse the previously uploaded guides.

Forex brokers

One new Forex broker has been added to EarnForex.com since the last issue of the newsletter:

  • Videforex — a rather strange amalgamation of a binary options broker, Forex/CFD platform, and a video chat. They use a custom web-based trading solution and are not regulated anywhere. The minimum account size to start trading is $250.

You can always view our full list of Forex brokers.

Top five Forex brokers of the last month

The top five Forex brokers, as reviewed by the visitors of EarnForex.com are the following:

  1. Weltrade — 10
  2. FinPro Trading — 9.3
  3. GAINSY — 9.2
  4. ForexChief — 9.2
  5. FreshForex — 9.1

To qualify for a placement in this list, a Forex broker should have at least three valid reviews. Do not forget to review your favorite broker if you have not done so already.

Forex poll

One new poll has been posted in the EarnForex blog:

You can also browse the full list of Forex polls from EarnForex.com.


Top five hot topics on EarnForex Forum in March:

  1. Brand New EA Falcon Inverter
  2. My way.
  3. Recently signed up to a broker, wanted your thoughts...
  4. No Sleep EA With no restrictions ...
  5. Why people have big loses in trade?
Forex industry news

There was the following important Forex industry news since the last issue of the newsletter:

  • Google Play banned binary options platforms following a similar step made by Apple's App Store in 2017. This will further ostracize the binary options industry, which seems to be under a constant fire during the last few years.
  • Our free Forex course has been finally translated in four language in addition to English: Arabic, Chinese, Russian, and Spanish.
Until the next newsletter issue!

That is all for the May 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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