Good morning, traders! Today we have an informative post about the Forex Market. The idea is that traders who have just started in this have clear the fundamental concepts, and for those of us who have been around for a long time, it never hurts to refresh some content!
🔸Let's start with some basic concepts:
The forex market is where numerous participants, including banks, funds, and individuals, carry out transactions to buy or sell currencies. There are several reasons why this happens, but most of the volume of transactions is for speculative or investment reasons. This market operates every business day of the week, 24 hours a day.
There are three sessions, the Asian session, the European session, and the US session.
It is the largest financial market in the world, and the main participants (those that negotiate the highest volume) are private banks, central banks, private companies, investment firms, or funds and brokers. Retail investors are involved, of course, but they do not do the high volume.
The main characteristic of this market is that it is not a centralized market such as futures or stocks. It comprises two levels, the interbank level and the OTC level (over the counter). The interbank market is where large institutions carry out their transactions, and the OTC market is where individuals carry out theirs.
The volume that is handled daily usually exceeds 5 trillion dollars.
In short, the foreign exchange market is unique because of the following characteristics:
- its huge trading volume, representing the largest asset class in the world, leading to high liquidity;
- its geographical dispersion;
- its continuous operation: 24 hours a day except for weekends, i.e., trading from 22:00 GMT on Sunday (Sydney) until 22:00 GMT Friday (New York);
- the variety of factors that affect exchange rates;
- the use of leverage to enhance profit and loss margins and concerning account size.
🔸How did the Forex Market originate?
After the Second World War, the system known (currencies tied to precious metals) collapsed and was replaced by the Bretton Woods agreement. This implied creating three international organizations that are in charge of facilitating economic activities within the planet. They were the IMF (International Monetary Fund), the General Agreement on Tariffs and Trade (GATT), and the International Bank for Reconstruction and Development (IBRD). The idea of this system was to replace gold with the US dollar to tie international currencies.
🔸Currency Predominance:
Obviously, the USD is the most traded currency in the forex market, with approximately 85% of transactions, followed by the euro and the Japanese Yen.
The currencies are shown in pairs, where the value of one currency to another—the base currency (or the first one) versus the second or the quote currency. It indicates how much of the quote currency is needed to purchase one unit of the base currency.
Here, we leave our daily chart analysis of all the major pairs, that is, the pairs tied to the USD.
🔸AUD/USD:
The price has bounced at the Daily Demand Zone and was rejected there. We expect a bullish push towards the Descending Trendline of the current structure.
🔸EUR/USD:
The price was slightly rejected at the Ascending Trendline, making us think about a potential bullish move towards the Resistance Zone again. However, if that fails, we need to consider the bearish view also.
🔸GBP/USD:
It broke the Ascending Channel, with a nice push to the downside. We expect a bearish move towards the next Support/Demand Zone.
🔸NZD/USD:
This scenario is pretty similar to AUD/USD. The price bounced at the Demand Zone, and we are waiting for the movement to reach the Descending Trendline.
🔸USD/CAD:
The price broke the Descending Channel with a strong impulse, and now it is correcting on edge. If we see a rejection here, the bullish view will remain valid towards the next Resistance Zone.
🔸USD/JPY:
The price is facing the previous high, where it has been consolidating a bit. If we see a breakout, a safe scenario would be to wait for a retest + rejection to confirm the bullish move towards the next Resistance Zone.
🔸USD/CHF:
The price bounced slightly at the Ascending Trendline (pullback), but we need to see a deeper push to confirm the downside continuation. We consider this because the main trend is bearish at this pair.
🔸Let's start with some basic concepts:
The forex market is where numerous participants, including banks, funds, and individuals, carry out transactions to buy or sell currencies. There are several reasons why this happens, but most of the volume of transactions is for speculative or investment reasons. This market operates every business day of the week, 24 hours a day.
There are three sessions, the Asian session, the European session, and the US session.
It is the largest financial market in the world, and the main participants (those that negotiate the highest volume) are private banks, central banks, private companies, investment firms, or funds and brokers. Retail investors are involved, of course, but they do not do the high volume.
The main characteristic of this market is that it is not a centralized market such as futures or stocks. It comprises two levels, the interbank level and the OTC level (over the counter). The interbank market is where large institutions carry out their transactions, and the OTC market is where individuals carry out theirs.
The volume that is handled daily usually exceeds 5 trillion dollars.
In short, the foreign exchange market is unique because of the following characteristics:
- its huge trading volume, representing the largest asset class in the world, leading to high liquidity;
- its geographical dispersion;
- its continuous operation: 24 hours a day except for weekends, i.e., trading from 22:00 GMT on Sunday (Sydney) until 22:00 GMT Friday (New York);
- the variety of factors that affect exchange rates;
- the use of leverage to enhance profit and loss margins and concerning account size.
🔸How did the Forex Market originate?
After the Second World War, the system known (currencies tied to precious metals) collapsed and was replaced by the Bretton Woods agreement. This implied creating three international organizations that are in charge of facilitating economic activities within the planet. They were the IMF (International Monetary Fund), the General Agreement on Tariffs and Trade (GATT), and the International Bank for Reconstruction and Development (IBRD). The idea of this system was to replace gold with the US dollar to tie international currencies.
🔸Currency Predominance:
Obviously, the USD is the most traded currency in the forex market, with approximately 85% of transactions, followed by the euro and the Japanese Yen.
The currencies are shown in pairs, where the value of one currency to another—the base currency (or the first one) versus the second or the quote currency. It indicates how much of the quote currency is needed to purchase one unit of the base currency.
Here, we leave our daily chart analysis of all the major pairs, that is, the pairs tied to the USD.
🔸AUD/USD:
The price has bounced at the Daily Demand Zone and was rejected there. We expect a bullish push towards the Descending Trendline of the current structure.
🔸EUR/USD:
The price was slightly rejected at the Ascending Trendline, making us think about a potential bullish move towards the Resistance Zone again. However, if that fails, we need to consider the bearish view also.
🔸GBP/USD:
It broke the Ascending Channel, with a nice push to the downside. We expect a bearish move towards the next Support/Demand Zone.
🔸NZD/USD:
This scenario is pretty similar to AUD/USD. The price bounced at the Demand Zone, and we are waiting for the movement to reach the Descending Trendline.
🔸USD/CAD:
The price broke the Descending Channel with a strong impulse, and now it is correcting on edge. If we see a rejection here, the bullish view will remain valid towards the next Resistance Zone.
🔸USD/JPY:
The price is facing the previous high, where it has been consolidating a bit. If we see a breakout, a safe scenario would be to wait for a retest + rejection to confirm the bullish move towards the next Resistance Zone.
🔸USD/CHF:
The price bounced slightly at the Ascending Trendline (pullback), but we need to see a deeper push to confirm the downside continuation. We consider this because the main trend is bearish at this pair.