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Tuesday, January 1, 2019

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EarnForex.com Monthly Newsletter
January 1st, 2019

Happy New Year, traders! Welcome to the latest issue of EarnForex.com newsletter — January 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: Will HFT Kill Off Retail Traders? ☠️

Many Forex traders — either prospective or experienced — wonder what might happen if high-frequency trading (HFT) becomes even more wide-spread. Will it replace all other traders? Will it kill the currency trading opportunity for retail traders?

High-frequency trading can be defined as a kind of algorithmic trading performed at high speeds — with large number of orders and with high total volume executed during short periods of time using specially designed computer networks. The last point is very significant. It implies that an individual trader or even non-specialized institutional investor cannot practice HFT due to the lack of required infrastructure. HFT is nothing new — in equities, it has been around since 2001. In Forex, it was a thing since at least 2009.

According to the studies, the effect of HFT on actual experience by other traders is mostly positive:

  • Algorithmic trading improves liquidity for retail traders (at least in stocks and stock futures).
  • Asset prices can now reflect faster the change in demand and supply — high-frequency traders are the ones who react first.
  • HFT decreases market inefficiencies, which is the only source of consistent profits for speculative traders (retail or institutional).

So, in a nutshell, HFT makes markets more liquid and fairly-priced, but decreases the number of opportunities to earn profit on situations when asset prices deviate from their fair levels. In theory, as the percentage of HFT participants rises, the FX market will become more and more efficient, turning less profitable for retail traders. However, according to the best information we have (the Triennial FX report by the BIS), less than 4% of FX trades are currently executed by HFT participants. This means that the foreign exchange market has a long road to go before retail trading ceases to be a viable option for savvy speculators.

Overview of the major currency pairs' performance in December

EUR/USD — was in a sideways market with a slight bullish bias. It was at the maximum at 1.1485 on December 20, at its minimum at 1.1269 on December 14, finishing the month at 1.1445.

GBP/USD — after falling initially, the currency pair managed to recover from the losses by the end of the month. The highest monthly rate was at 1.2839 on December 4, while the lowest — at 1.2475 on December 12. GBP/USD finished December trading at 1.2739.

USD/JPY — fell abruptly in December. The pair rose to as high as 113.82 on December 3, reaching a bottom at 109.63 on December 31 and closing the month with the 109.68 rate.

AUD/USD — was also very bearish during the entire month. The monthly high was at 0.7393 on December 4, the monthly low — at 0.7016 on December 27. Trading ended at 0.7043 for this currency pair.

USD/CAD — was in a strong uptrend. The maximum level for this pair was 1.3664 on December 31, while the minimum — 1.3159 on December 3. The month's trading ended at 1.3642 for USD/CAD.

Fundamental background of the past month

The US dollar demonstrated mixed performance in December, rising against commodity currencies, but falling versus most other majors. Disappointing nonfarm payrolls hurt the currency in the first half of the month. Monetary policy decision of the Federal Reserve was the most important event in the second half of the month. While the Fed hiked interest rates, markets were uncertain about Fed's outlook for the future as analysts were divided whether the Fed's stance was more dovish or less dovish than was anticipated. The US currency was also affected by such factors as US government shutdown and developments in the US-China trade war.

The euro started December strong on the news about the truce in the trade war between the US and China, though later the optimism cooled off. The currency was hurt by dovish comments from European Central Bank President Mario Draghi and fell to monthly lows after weak PMI prints. The currency recovered later on the news that Italy and the European Union managed to reach an agreement about Italy's budget deficit target.

The Great Britain pound did not perform well in December due to the ongoing Brexit drama. UK Prime Minister delayed the crucial Brexit vote, hoping to renegotiate the trade deal with the European Union. But the EU official stated that the deal is non-renegotiable, refusing to discuss a new agreement. May faced a no-confidence vote in the Parliament mere days after she survived the similar vote in her own Conservative party. Furthermore, MPs are trying to delay the Brexit by few months to prevent the Prime Minister wearing down her opponents by forcing them to vote on the Brexit deal at the last minute.

Risk aversion helped the Japanese yen to demonstrate good performance in December. While the news about the US-China truce led to optimism among investors, the positive outlook quickly evaporated, allowing the currency to rally. The market sentiment soured further after the arrest of the chief financial officer of Chinese tech giant Huawei, allowing the yen to ignore dovish comments from Bank of Japan Governor Haruhiko Kuroda. The currency profited further from market volatility caused by the monetary policy announcement from the US Federal Reserve. The yen ended the month on a strong footing as risk aversion persisted on markets due to concerns about slowing global growth and trade relationships between the United States and China.

The same risk aversion likely caused gains of the Swiss franc, allowing it to ignore negative domestic fundamentals like slowing inflation and a downgrade of inflation forecast. The downgrade of the growth forecast did hurt the currency, though.

The Canadian dollar tanked in December, mostly due to sinking prices for crude oil, though the surprisingly dovish Bank of Canada also played its part.

The Australian dollar started the month extremely strong on the news about US-China trade war truce. But that changed quickly as the currency was falling after the central bank policy meeting, disappointing domestic economic growth, the arrest of Huawei financial chief, and somewhat disappointing macroeconomic reports in China. The currency ended the month soft due to concerns about the US-China trade relationships and China's economic performance.

The New Zealand dollar had the similar issues, climbing on the news about US-China truce, but falling on China's weak macroeconomic data.

Gold was rising in December on the back of the weakening US dollar, especially after the Fed monetary policy announcement. The metal ended the month with a 4.6% gain, but for the whole year the metal posted losses.

Interest rate changes in December
Mexico 8.00% +0.25% 8.25%
Russian Federation 7.50% +0.25% 7.75%
Sweden -0.50% +0.25% -0.25%
Thailand 1.50% +0.25% 1.75%
United States 2.00% +0.25% 2.25%

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

MetaTrader indicators

No new MetaTrader indicators have been added to EarnForex.com since the last issue of the newsletter, but one indicator received a major update:

  • Market Profile now allows flexibility when dealing with Saturday/Sunday sessions and with Median/Value Area rays in version 1.09.

You can always view the previously uploaded Forex indicators.

Forex brokers

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

  • Fondex — a regulated (CySEC) European company with $1 ECN accounts. It offers access to thousand trading symbols via cTrader platform.
  • INFINOX — a broker registered in the United Kingdom and regulated by the FCA. Their minimum account size is $100, and MT4 platform is available.

You can always view our full list of Forex brokers.

Forex VPS providers

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

  • Kamatera — a global VPS provider with customizable plans.

You can always view our full list of Forex VPS services.

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. Coinexx — 9.8
  2. ForexChief — 9.4
  3. IFC Markets — 9.3
  4. Forex Optimum — 9.3
  5. FreshForex — 9.2

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 December:

  1. Fake education on trading
  2. Trading psychology 99 % of traders lose
  3. Software for back testing
  4. What is the most powerful Candlestick Reversal Pattern?
  5. Do not add to a losing position
Forex industry news

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

  • ESMA renewed its CFD/Forex trading rules through May 1, 2019. Previously, they were schedules to end after February 1, 2019.
  • Read our interview with the CEO of Commercial Network Services, one of the leading VPS providers for traders.
  • In an unprecedented movement, the Russian central bank has revoked licenses of the country's largest Forex brokers, including Alpari and Forex Club, citing various violations of regulatory requirements.
Until the next newsletter issue!

That is all for the January 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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