2023-01-16 09:32

In recent years, the Forex market has become one of the most popular investment options among traders. The market offers significant potential for large profits, but not without some risk. To succeed, traders must possess specific characteristics to thrive in this exciting industry. To be successful in the Forex markets, traders must possess certain mindsets and characteristics. These spell the difference between those who dabble in trading without careful assessment of their venture and those who are serious about making online trading a reliable income stream. In this issue, we will share with you some of the critical trader mindsets we have seen in the industry that have helped many people become more successful. 1. A passion for in-depth learning about trading While some people make trading look easy, there are technical skills, market jargon, and other intricacies that one needs to know to execute a trading plan successfully. Aside from this, one needs to learn crucial skills in managing risk exposure and crafting a winning trading plan, among other things. Many of our successful traders continuously expand their skills and knowledge to keep themselves abreast of industry changes. 2. Discipline Sticking to your goals is very important when it comes to trading. For example, successful traders consistently stick to and execute their trading plans flawlessly. An effective trading plan is well-thought-out and has a clear strategy. It is not a haphazard plan that does not have clear instructions. Traders must have a winning strategy before they start trading live and the discipline to execute the strategies aligned with that goal. 3. Patience While a select few can become overnight successes in trading, this rarely happens. Trading takes time and effort, and traders need to understand that they must invest their resources and time to learn about the trading game with all its peculiarities. Many successful traders had their ups and downs in trading, but their patience in sticking to their goals led to their success. When you are serious about trading Forex, you must ensure you have the right mindset, which will help you succeed in the Forex markets. These things are often overlooked, but they are the backbone of your success as a Forex trader. As we mentioned, you need to be disciplined and patient. You must be disciplined to stick to your trading plan and patient to only take the trades that meet your criteria. With a solid trading plan, discipline, and patience, you can make money trading Forex. Remember: “In trading, you must be both defensive and aggressive. If you are not aggressive, you will not make money, and if you are not defensive, you will not keep your money.” - Ray Dalio. The good news is that you can learn all the technical know-how and the mindsets of being a successful trader from ATFX Market Experts and with the tools provided by ATFX. By Gab Santos, ATFX Market Strategist (Philippines)

2023-01-16 09:30

New cryptocurrency trends of 2022 started in the 2nd quarter when major central banks actively tightened their monetary policies. Significantly tighter liquidity sent the cryptocurrencies into a steep fall in 2022 until we got temporary stability in the 3rd and 4th quarters. Due to the sharp decline in cryptocurrency prices for many months in 2022, reports emerged about cryptocurrency trading platforms and exchanges struggling with funding problems. The struggles were severe because some platforms could not process clients’ requests for cryptocurrency trading and cash withdrawals. Last November, FTX, one of the world’s largest cryptocurrency trading platforms, filed for bankruptcy protection, one of the most prominent bankruptcy cases in recent years, creating panic in the cryptocurrency market and further driving crypto prices lower. Take Bitcoin, which has the largest market cap among all cryptocurrencies. The crypto’s price dropped to its two-year low of USD 18,000 and even hit a new low of USD 15,500. With the cryptocurrency market gradually stabilising after the massive decline, investors and cryptocurrency market participants adopted a wait-and-see attitude towards the latest developments regarding FTX. Cryptocurrency holders were anxiously waiting for the arrival of “white knights” to rescue the exchange from the crisis, which is what Binance, the largest cryptocurrency exchange, tried to do before quickly withdrawing its offer. However, FTX’s bankruptcy not only made investors increasingly worried about the cryptocurrency market but also drew the attention of global regulators about the necessity of more stringent market regulation. In the future, we will see regulatory institutions impose more restrictions on the operations and trading activities of the cryptocurrency market, adversely affecting the trading and development of cryptocurrencies. Furthermore, over the past decade, changes in cryptocurrency prices were related to the financial markets and economic environment. When monetary policies and access to credit in the financial market tightens or the economic climate becomes risk averse, the cryptocurrency market generally contracts, sending prices lower. Given the trend of increasingly tighter monetary policies implemented by global central banks in Q1 2023 and a weakening economic climate, cryptocurrency prices are expected to drop. The degree to which regulatory authorities increase their regulation of the cryptocurrency market should also be monitored. If the Fed says that its rate hike cycle could stop before the end of Q1 and other regulators impose limited regulations, then these factors could have a positive impact on cryptocurrencies. Technical Analysis of Bitcoin Bitcoin is the crypto that commands the largest market share in the cryptocurrency market and is often used to predict the movements of the entire cryptocurrency market. The following is the weekly chart of Bitcoin. Technically, Bitcoin experienced a “free fall” in Q2 2022, but maintained sluggish movement after breaking the USD 25,000 level. In Q4 last year, it broke the critical support zone at USD 17,000 and was held back by the 10-week resistance line. The extension of its downturn is expected to reach the golden ratio of 138.6% at the USD 12,540 support zone. If this position is breached, then its would open the downtrend gap and investors should pay attention to the next golden ratio of 150% at the USD8,284 support area. On the contrary, if Bitcoin trades above the 10-week resistance line, participants should pay attention to the USD 23,762 level or its 100% golden ratio at USD 28,359. By Martin Lam, ATFX Chief Analyst of Asia Pacific

2023-01-16 09:23

Gold prices showcased robust performance on the first trading day of December, topping $1,800 and returning to the levels recorded in early 2022. However, this did not translate into a strong rally as the yellow metal stagnated. The Fed rate hikes and inflation will continue to influence gold prices in 2023, with a global economic recession providing tangible support. Although the Fed has eased the size of its rate hikes since December 2022, the rate hiking cycle continues, with the federal funds rate expected to hit 5.50% by mid-2023. Before the Fed makes an apparent policy shift, there is still room for gold prices to edge lower. Falling inflation will eventually push real yields higher, and they will only pull back if the Fed suspends its rate hikes. In other words, changes in the dollar and bond yields will continue to drive gold price volatility. However, as the Fed takes a slower approach to rate hikes, the dollar is expected to have less momentum in the new year than in 2022. Hence, exerting less pressure on gold prices and increasing the yellow metal’s allure. Although gold’s performance was not eye-catching in 2022, it still outperformed the US stock and bond markets and the S&P 500 Index despite hitting the yearly low of $1,618. According to previous trends, a further slowdown in economic growth will squeeze corporate profit margins attracting investment capital to the precious metals market. Suppose the US economic downturn worsens and a recession emerges during the same period. In that case, the safe-haven role of precious metals could cushion investors from the pressure of high interest rates and support a bottom in gold prices. According to the World Gold Council (WGC), gold has generated positive returns in five of the last seven recessions. There is one caveat: a “soft landing” of the economy will be less supportive of gold prices. Although an economic recession is good for gold to act as a safe-haven instrument, inventors should pay attention to economic pressure, which is one of the negative factors for silver. The economic downturn directly weakens industrial demand and suppresses silver prices. Since over 50% of silver demand comes from industrial use, silver may experience more significant price fluctuations than gold. On the economic front, it is worth noting that some Asian countries are recovering much more quickly than major economies in Europe and the US, fueling an improvement in the demand for physical gold and silver. The economic recovery of the leading gold-consuming countries (like China and India) in Asia could trigger a rebound in the consumer market, boosting gold prices as physical demand for precious metals increases. In addition, central banks’ continuous buying of gold is another contributor to high prices. As of October 2022, global central bank gold reserves reached the highest level since November 1974. Last year saw strong net buying of gold, which is expected to continue in 2023. Gold Technical Analysis As shown in the monthly chart below, spot gold prices have regained momentum after securing support at the lower side of the descending channel since the beginning of the second half of 2022 and are now testing the $1,800 psychological mark. If the prices stay above this crucial level, investors should note that the $1,800 to $1,920 range has seen active trading. A period of consolidation cannot be ruled out, and the chances of breaching the upper bound of the channel during the period are worth considering. A further increase to $1,955 is likely, which has served as crucial resistance many times before and may soon act as a trigger for a technical pullback. Considering that the market has foreseen the possibility of interest rates cut by the Fed, gold prices will hardly break through $2,000 in Q1 unless the global economy suffers a sharp recession. On the contrary, we believe the dollar will likely remain the safe-haven asset of choice as the global economy faces significant downward pressure. The Fed has already predicted in its December minutes that interest rates will rise to the terminal rate and that the high rates will linger much longer. The overall rebound of gold prices will still be subject to headwinds before the Fed decides to reverse the direction of its policies. Under these circumstances, there is a chance that gold prices may head towards the critical support at $1,600. There is a lower support at $1,561, and the support zone at the lower end of the descending channel will be tested again. According to the monthly chart, spot silver prices are trying to move closer to the upper side of the descending channel, with the $24 mark possibly serving as resistance. If the level is smashed thanks to the favourable fundamentals mentioned above, silver prices will test $26.25, with the next critical resistance being $28.24. On the support front, the 10-day moving average may exceed $18 if the preliminary support is breached, entering the active trading range from August 2019 to February 2020. By Jessica Lin, ATFX (Asia Pacific) Global Market Analyst

2023-01-16 09:21

The Mexican peso started the last quarter of the year by gaining ground against the US dollar after it stopped oscillating around 20.14. The peso gained ground significantly from October 31, when the country reported robust GDP growth from 2.0% to 4.2%, making the currency the strongest against the US dollar. Subsequently, the peso continued appreciating and reached an exchange rate of 19.43473 on November 7, its best level since May. From that point onwards, the Mexican peso remained strong, driven by the country’s high interest rates that had favoured the currency throughout the year due to its attractiveness for the carry trade. Inflation data remained high, so when on November 9, a 0.29% drop in inflation was reported, it prompted the Bank of Mexico (Banxico) to extend its aggressive monetary policy by hiking interest rates by 75bps the day after the inflation figure, bringing its lending rate to 10.00%. It seems that the decision made by Banxico to hike interest rates paid off since, on December 8, inflation data registered a 0.61% decline, starting a deflationary trend that made the peso continue trading below 20mxn per dollar. However, the optimism around the peso has diminished since the December 15 rate hike of 50bps. Within the minutes of the November monetary policy decisions, most policymakers mentioned that they anticipate a moderate recovery in the global economy due to the reopening of some cities in China. However, they also highlighted the risks associated with the postpandemic era, including geopolitical tensions and the monetary positions of other central banks, such as the Fed, that remain tight. Furthermore, policymakers also mentioned that many central banks will likely keep raising interest rates, although some to a lesser extent than expected, throughout 2023. It is also important to note that Banxico’s largest rate hikes were aligned with the Fed’s decisions by 75 basis points, and we should also mention that the central bank expects the Fed to start slowing down the pace of future interest rate hikes. To determine the future direction of the Mexican peso, we should watch the accumulated monetary policy tightening and the economy’s performance along with that of the financial markets. The Bank of Mexico (Banxico) is now forecasting a higher interest rate than anticipated and is likely to maintain its rate hike stance while still keeping an eye on critical economic data. On the other hand, conditions for the Mexican peso have been favourable because the Mexican economy recovered and expanded during the third quarter, as it did in the previous two quarters. It is also worth mentioning that much of the peso’s strength in this last quarter was because economic activity returned to pre-pandemic levels. In addition, manufacturing activity showed good progress as private consumption and demand for domestic goods and services was reactivated. Another factor that set the tone for the Mexican peso’s impressive performance was that foreign remittances continued at high levels, fueling the sale of US dollars for Mexican pesos. Technical Analysis After seeing a drop in the dollar towards 19.03957, the markets opted to end the year with high demand for dollars, sending the USD above 19.70. Given that the USDMXN pair usually moves sideways for medium periods, we can expect the price to respect the 19.60 and 19.80 levels before the end of December and to start January with some volatility based on US data. 2022 is set to end with the peso appreciating close to 3.5%, which is a good result. However, we could see the peso weaken in 2023 and fall towards 20.48, which was the starting level of 2022, driven by an increase in USD purchases as the Fed hikes interest rates and US Treasury bond yields rise. At the time of writing, the Mexican peso had weakened to 19.7 per dollar, approaching the seven-week low of 19.8 hit on December 12. The dollar had recovered from its recent lows as investors digested the Bank of Mexico’s monetary policy decision. As widely expected, the Bank of Mexico raised its benchmark policy rate by 50 basis points in December, raising borrowing costs to record highs. The decision coincided with the Federal Reserve’s decision to hike rates for the sixth consecutive time. Banxico was keen to limit the difference between its rates and the Fed’s to reduce capital outflows and support the Mexican peso. Monetary policymakers also signalled that they will continue to raise interest rates in 2023 to curb rising inflation. However, they also noted that inflation will continue to decline, although the latest forecasts indicate that price growth will converge to the central bank’s 3% target by the fourth quarter of 2023. With all the above, we forecast that as long as the Mexican peso remains below 20.20, it will remain strong as in this zone, trade volumes tend to decrease, and the 20.01 level remains the focal point. On the other hand, the price action has generated some wicks in the 19.80 zone, fueling some sideways movement that could send the dollar back below 19.60. By Eduardo Ramos, ATFX LATAM Market Analyst

2023-01-16 09:10

Spiralling inflation has sparked a cost-of-living crisis across Europe. Governments are trying to shield households and businesses from the seemingly never-ending surge in energy prices. The energy crisis has made the eurozone economy’s outlook gloomy, as industrial production fell 2% in October 2022. With the supply chain risks and energy prices remaining high during Q1 2023, this promises to be a challenging year. Despite the aggressive rate hikes by most central banks, the eurozone consumer price index for November 2022 came in at 10% (Figure 1), down from 10.6% in the previous month. Double-digit inflation remains a significant burden for consumers forcing the ECB to maintain a tight monetary policy stance. However, European central banks remain optimistic about the growth forecasts for the region’s economy while expecting inflation to ease to 3.4% in 2024 and 2.3% in 2025. At the same time, the growth forecast for the euro area sits at 0.5% in 2023 and 1.9% in 2024, which could support the euro, limiting its further decline. Furthermore, the ECB decided to raise interest rates by 50bps at its December interest rate meeting, slowing down from 75bps rate hikes at the previous two meetings. However, the ECB is expected to continue raising interest rates at its upcoming meetings to curb inflation, which remains at extremely high levels. By contrast, starting in March 2023, the ECB’s asset purchase program (APP) portfolio will decline at a measured and predictable pace. The tightening of monetary policy is continuing even as the ECB predicts that economic activity will likely contract in 2023. However, the Eurozone’s recession will not last long, with the unemployment rate and labour market remaining healthy. Therefore, the Euro will likely be supported for most of the first quarter of 2023. Across the Atlantic, the US inflation data published in December 2022 saw inflation fall from a peak of 9.1% to 7.1% (Figure 3). This positive development seems to have slowed down the previous aggressive interest rate hikes by the US Federal Reserve. During its last meeting in December 2022, the Fed announced the decision to raise interest rates by 50bps to 4.5%, slowing its rate hikes, which caused the dollar to lose support. However, analysts expect the Fed funds rate to peak at 5.1% in 2023 before dropping to 4.1% in 2024. This means that the Fed could maintain a high interest rate regime for most of 2023. The Fed’s stance on monetary policy is different from the ECB’s. While the EU’s CPI has just begun to show signs of falling for the first time, the US CPI started declining following the July 2022 announcement. The macro advantage may favour the euro if we don’t consider the potential risks from geopolitical tensions and energy prices. However, it is necessary to keep a close eye on relevant economic and political news in the future. Technical Analysis On the Daily time frame, the EURUSD currency pair broke out of a descending channel that had lasted from February 2022 and formed a bullish structure with higher highs and higher lows. Looking at the weekly timeframe, the uptrend seems to have just started, and the Euro needs more support to trade in the higher price zones. Critical Support Levels are 1.03400 – 1.05600 & Zone 1.00000 – 1.02000. If the above support levels hold, the EURUSD will likely move towards 1.15400 – 1.17400. By Linh Tran, ATFX Market Analyst (Vietnam)

2023-01-16 08:51

In the past few months, stock markets have staged a massive comeback recouping some of their yearly losses, driven by optimism that inflation has peaked and started cooling. The recent loosening of China’s strict zero-covid policy has also helped fuel the bullish investor sentiment. However, investors should not get overly excited as the rally could be a minor retracement to the upside before another significant drop. The cautious approach is based on an analysis of the leading US economic indicators, most of which point to a recession next year. While other metrics, such as company valuations and earnings, remain optimistic, they do not reflect the increasingly weak macroeconomic conditions. After a challenging year, equity markets recovered more than half of their yearly losses after the August US consumer price index (CPI) data showed a substantial drop in inflation. Softer inflation numbers signalled to most traders the beginning of the end of the Fed’s battle against inflation. The US central bank started hiking interest rates aggressively earlier this year to tackle the soaring inflation, which rose to a record 9%. Adding to the bullish sentiment, signs that China is preparing to reopen its wounded economy sparked a fierce rally in risk assets. Unfortunately, even though the S&P 500 index rose more than 15% from its April lows, all of this could be premature. Inflation is still running at almost four times the Fed’s 2% target, so it’s too early to be entirely optimistic since a peak in inflation is one thing – but how fast it goes down is an entirely different story. The factors pushing inflation lower are equally crucial in ensuring inflation falls. Based on current US economic indicators, inflation declined in the 3rd quarter because price pressures are settling down as demand collapses quickly, according to the business surveys such as the composite manufacturing and services PMI. The PMI readings warn that the US economy is headed straight for recession as higher borrowing costs and the cost-ofliving affect consumers’ spending power, affecting the economic cycle. It’s not only business surveys that are warning of a recession. Other economic indicators suggest the same too. Inventory levels, housing prices and consumer confidence warn of an upcoming recession. Inventories are incredibly high, which is a classic sign of a downturn. Housing prices have fallen off a cliff as home sales are down dramatically this year, which is unsurprising considering that mortgage rates have exceeded 7% for the first time in two decades, discouraging borrowing. Consumer confidence metrics are similarly alarming, and people are unlikely to make major spending decisions if they feel unsure about the future. Finally, if you look at the Fed’s favorite recession indicator, the treasury yield curve, it’s warning of deep trouble ahead as it is deeply inverted. The 3-month Treasury yields are trading far above 10-year yields, indicating that bond traders are betting that the economy is about to hit a wall. The inverted yield curve has predicted recessions with terrifying accuracy in the past. With economic indicators pointing to a recession, the economic problems within the Equities markets are: 1. Valuations are way too expensive. 2. Earnings do not reflect the weakening economy yet. Therefore, even though the latest stock market rally could keep going, it could be a short-term rally purely driven by speculation and short-term trading. Hence, it is likely to run out of steam before long. Let’s start with the valuation aspect. Historically over the last decade, an era characterized by very low interest rates, whenever there was a selloff in the equity markets, the forward earnings multiple was closer to 14x, given that low interest rates boost valuations. At the time of writing, the S&P500 is trading at 16.5x forward earnings, while the federal reserve has hiked interest rates to 4.50% and intends to raise it to 5% next year. In other words, if a drop-off is coming, given today’s high interest rate regime, the stock markets could bottom at a much lower multiple. This rationale provides ample scope for further downside based on a valuation perspective before considering earnings declines. As for company earnings, estimates continue to be overly optimistic and out of sync with what the economic indicators suggest about the economy. However, as the global economy enters a slight recession, these estimates are expected to be revised lower as consumer demand shrinks. S&P 500 companies that receive more than 40% of their revenue from overseas will be the hardest hit. What about the technical perspective? The S&P500 index is trading near the 4,000 level as a 5-day correction pushed it below the 4,100 high seen on December 1, 2022. The correction is a product of the 200 SMA playing its role as a robust dynamic resistance level. The index could not defeat the moving average and generated a perfect lower swing high. As you can see in the chart below, there is a descending trendline from the all-time highs, with the recent swing highs confirming the bearish bias. However, the Ichimoku Kinko Hyo indicator justified the recent upside move when prices moved past the bearish cloud and beyond the kijun-sin line at 3,900. Nonetheless, the S&P 500 retreated from recent highs, and now the RSI is pointing south while at the midpoint. Furthermore, the MACD confirmed a possible price reversal to the downside, with both lines threatening to break below 0 mid-line. The stochastic indicator also supports the above correction as it finally broke below its moving average and moved away from overbought territory. The almost vertical move lower supports the view that this correction might have some legs. Only the RSI is challenging this bearish development as, despite the recent drop, it remains above 50, thus giving some hope to the bulls that the battle has not been lost yet. If the bears take the reins, the immediate targets would be 3,820, represented by the Ichimoku clouds. The next critical level would be at the 3,846 support level, where the downside rally ended in late June and again in late October. If the bears are determined, they will target the crucial yearly low of 3,495. Should the bulls take control of the market and break the 200 SMA at 4,100, the path to retest the August high of 4,330 would be wide open. All told, the latest rallies do not herald the beginning of a new bullish market. By every metric, a recession seems inevitable. And when it is accompanied by very high interest rates, traders will start asking, “How long and how deep will the recession be?” Therefore, if a recession is coming, is there a bright side? This will depend on how the Federal Reserve will act in the upcoming quarters. If the Fed and the government are keen on causing a recession to squash inflation, they could also turn the ship around before it sinks completely. Make no mistake, the latest financial debacles, such as famous Crypto exchanges imploding and UK pension funds facing collateral hurdles, are simply the first signs of what happens when liquidity gets drained from the markets due to higher interest rates. By Mohammed Shanti, ATFX Senior Market Analyst (MENA)