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Tuesday, March 5, 2019

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EarnForex.com Monthly Newsletter
March 5th, 2019

Hello traders! Welcome to the latest issue of EarnForex.com newsletter — March 2019.

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: The Law of Large Numbers in Forex Trading 🔢

The law of large numbers states that as the number of observations increases, the average of the observed values gets closer to the expected value. This law is a part of a probability theory and is very important to all Forex traders. For them, there are two main implications from this law:

  1. When you backtest (or forward-test) a strategy, you have to make sure that you get a large number of trades to analyze the strategy's performance on. The less trades you get to analyze, the more random and less reliable your results are. As the number of trades in the sample increases, you are getting more and more reliable estimation of how your strategy would run in a longer term.
  2. When you use a strategy in live trading, the more currency pairs you apply it to, the closer your results will be to the expected average values. Trading on just one currency pair can result in long streaks of losses, which are hard to go through. As you add more currency pairs to the pool, the distribution of your trading results becomes more uniform, with shorter losing streaks. The important thing to remember here is to use uncorrelated currency pairs - otherwise, the effect might be the opposite.

The more is definitely the better when it comes to testing and applying your trading system to various markets. Even if you are not very good at probabilities and your understanding of math is limited to the basic concept, you should still aim to benefit from the law of large numbers as this does not require any comprehension.

Overview of the major currency pairs' performance in February

EUR/USD — posted a nearly perfect V-pattern in February. It was at the maximum at 1.1488 on February 1, at its minimum at 1.1234 on February 15, finishing the month at 1.1370.

GBP/USD — moved similarly to EUR/USD but managed to show a much stronger recovery, rising significantly above its monthly open level. The highest monthly rate was at 1.3350 on February 27, while the lowest — at 1.2772 on February 14. GBP/USD finished February trading at 1.3262.

USD/JPY — was in a steady uptrend in February. The pair rose to as high as 111.49 on February 28, reaching a bottom at 108.72 on February 1 and closing the month with the 111.37 rate.

AUD/USD — fell initially and then continued to trade sideways. The monthly high was at 0.7284 on February 1, the monthly low — at 0.7054 on February 12. Trading ended at 0.7091 for this currency pair.

USD/CAD — rallied during the first few days of the month but then entered a downtrend, declining to near the open level. The maximum level for this pair was 1.3339 on February 14, while the minimum — 1.3068 on February 1. The month's trading ended at 1.3168 for USD/CAD.

Fundamental background of the past month

In February, the US dollar was largely driven by developments in Sino-US trade negotiations. While no specific details were revealed, it looks like the trading partners and the world's two largest economy managed to extend truce for undetermined period of time. Poor US macroeconomic reports, including the biggest drop of retail sales in 9 years, led to concerns about slowing economic growth, which was confirmed by the fourth quarter GDP data, but that did not prevent the greenback from ending the month as one of the strongest currency on the Forex market.

February started poorly for the euro as the European Commission downgraded its growth forecasts. Woes of the currency continued with poor macroeconomic data and concerns about new US car tariffs.

The start of February was bad for the Great Britain pound too as all PMIs released by Markit (manufacturing, services, and construction) fell and were below market expectations. The Bank of England hammered the currency further, leaving its monetary policy unchanged and stating that the negative effects of the Brexit had increased. The sterling fell even further after UK Prime Minister Theresa May failed yet again to convince the Parliament to support her Brexit plans. And it looked like she was willing to allow Britain to leave the European Union without a trade deal if no compromise is achieved before the end-of-March deadline. But later she did a one-eighty, saying that if she suffers a defeat in the next Parliament vote she will propose two separate votes for delaying the Brexit and guaranteeing no "hard" Brexit.

The Japanese yen rallied in the first half of February after Japanese Prime Minister Shinzo Abe praised the Bank of Japan for its efforts in supporting the Japanese economy. But the rally did not last long, and the currency plunged to the lowest level this year after a release of weak macroeconomic data, which was followed by a release of a report that showed slower-than-expected economic growth. BoJ Governor Haruhiko Kuroda hurt the yen even more, suggesting that the central bank can ease its already extremely accommodative monetary policy if rising currency poses an obstacle in achieving the 2% inflation goal. But ultimately, risk appetite caused by the positive developments in the US-China trade talks was the main reason for the currency's weakness.

The Swiss franc was following the market sentiment for the most part, often ignoring domestic macroeconomic indicators, including the falling Producer Price Index.

As it usually happens, the Canadian dollar was following moves of crude oil prices. Ultimately, that was positive for the currency as crude rallied over February. But the loonie entered a new month with a big drop as the Canadian economy slowed its annual growth more than was expected and even declined on a monthly basis.

The Australian dollar demonstrated extremely poor performance last month. Initially, things looked good for the currency as it seemed like the Reserve Bank of Australia maintained its tightening bias. But the very next day RBA Governor Philip Lowe shattered such optimistic view, stating that chances for an interest rate cut and a hike are now roughly equal, the statement he also reiterated later in his speech. Afterwards, Westpac Banking Corporation went as far as predicting two interest rate cuts this year. Adding to the negative factors, the RBA downgraded its economic forecasts. And while the positive news about the trade negotiations between the United States and China helped the Aussie somewhat, the positive impact did not last long.

The New Zealand dollar fell after a release of surprisingly poor employment data. The currency rallied later after the Reserve Bank of New Zealand signaled that it has no plans for cutting interest rate this year or the next. But market participants challenged such view, speculating that the increase of capital requirements for the country's four biggest banks may create tighter financial conditions, which in turn can force the central bank to ease its monetary policy.

Gold received support in February from the extremely poor US retail sales and signs that the Federal Reserve may pause its monetary tightening cycle. Yet the metal retreated by the end of the month, dragged down by the strong US dollar.

Interest rate changes in February
Republic of India 6.50% -0.25% 6.25%

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:

You can always view the previously uploaded Forex indicators.

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:

  • CapitalXP — an unregulated broker based in an offshore jurisdiction, it offers MT4 trading with $250 minimum account size and 1:100 maximum leverage.

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. IFC Markets — 9.2
  2. GAINSY — 9.2
  3. ForexChief — 9.1
  4. Fort Financial Services — 9.1
  5. Turnkey Forex — 9.0

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.

Forum

Top five hot topics on EarnForex Forum in February:

  1. Easy Trend Visualizer
  2. Why trade in demo not feel any risk??
  3. Why people have big loses in trade?
  4. Account Protector
  5. How much deep the forex market?
Forex industry news

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

  • ESMA extended its binary option ban for another period of three months — from April 2 through July 2, 2019.
Until the next newsletter issue!

That is all for the March 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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