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Into the Storm: US ADP, ISM Services Start Three Day Data Blitz

Talking Points:

- EURUSD slumps to fresh five-week lows, eyes 1.1096.

- USDCAD rebounds, erases Canadian GDP losses ahead of BoC.

- See the DailyFX Economic Calendar for Wednesday, March 4, 2015.

Event risk is heavy the through the end of the week; today the focus is on the Canadian and US Dollars. It seems as if traders are holding onto narratives rather than objectively looking at data at present time. The Euro’s reaction to the strongest retail sales data since 2005 is a good example: the market is focused on Greece and the ECB’s QE program, and is therefore ignoring ongoing improvements in the overall data picture.

If the same attitude is being carried over to the Canadian and US Dollars today, then it keeps the attitudes of ‘buy the dip’ in the US Dollar and ‘sell the rally’ in the Canadian Dollar at the forefront. Market participants, especially those engaging the greenback around US economic data, may be conditioned to thinking weak winter period data is truly a result of the weather; and any weakness seen in the US ADP Employment Change report for February or the February US ISM Services/Non-Manufacturing index are flukes.

For the Loonie, traders have summarily dismissed the ‘better than expected’ GDP data from yesterday (with USDCAD trading back to its pre-release levels), in spite of the fact that the chance of a rate cut by the Bank of Canada today is below 20%, according to the OIS market. Although the Canadian Dollar rallied on the figures, the December and Q4’14 GDP figures were quite hollow: the savings rate was down; consumption growth slowed; export growth slowed; and inventory build-up and increased government spending propped up the headline readings.

See the above video for technical considerations in EURUSD, GBPUSD, and USDCAD.

Read more: March Forex Seasonality Sees US Dollar Rally Stunted

— Written by Christopher Vecchio, Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher’s e-mail distribution list, please fill out this form

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Dollar Holds its Range as Traders Look to SPX and NFPs as Loaded Catalysts

Talking Points:

  • Dollar Holds its Range as Traders Look to SPX and NFPs as Loaded Catalysts
  • Euro: Is There More Easing from a Well-Priced ECB Stimulus Program?
  • Australian Dollar Refuses to Break 0.79 Despite RBA Hold, Data, China Improvement

Dollar Holds its Range as Traders Look to SPX and NFPs as Loaded Catalysts

Event risk to start this week has not been concentrated enough to drive the Dollar from its five-week range. Monday’s round of economic indicators was the most potent hit. Manufacturing and construction activity reports bowed to the personal income and spending data for January. Spending eased, but adjusted for inflation driven by items like cheaper gas prices, this foundation for GDP actually grew (0.3 percent). More interesting from this mix was the income component which reinforces the earnings figures seen in the January NFPs data run with another 0.3 percent increase. As for the inflation statistics that are derived from this consumer data – the Fed’s preferred PCE measures – the core figure held steady at 1.3 percent. Moving forward, the focus for Dollar traders should remain on two particular themes: counterpart strength and anticipation for Friday’s labor data. With the ECB set to activate its QE program this week, the PBoC surprising with a cut over the weekend and other major counterparts keeping a weak path; the Dollar looks slightly more attractive each day. But that marginal gain in popularity will be dampened as traders nervously await the Bureau of Labor Statistics to report February jobs numbers.

Euro: Is There More Easing from a Well-Priced ECB Stimulus Program?

The Euro faces a similar quandary to the Dollar: how efficiently have the markets priced in future policy changes? For the Greenback, the market is trying to price the probability and impact of a rate hike sometime ‘mid-2015’. For the Euro, the question is how much depreciation should be wrung from the introduction of a QE program. The ECB confirmed an open stimulus program at its last meeting and speculation of its arrival drove the currency down well in advance of the approval. So, how much further does the market run on established trajectories? That depends on the bearings of its counterparts, the details (particularly triggers for upgrade) of the program and the revival of other factors like Greece.

Australian Dollar Refuses to Break 0.79 Despite RBA Hold, Data, China Improvement

A range of fundamental event risk these past 48 hours has contributed to a measurable improvement in the Australian Dollar’s prospects. And yet, AUDUSD has proven incapable of returning to 0.7900 – much less overtake it. An unexpected hold from the RBA led some doves to shake some of their bearish exposure while 4Q GDP figures that were generally inline with a moderate trend of expansion offer a foundation for the carry currency. Meanwhile, better than expected Chinese PMI figures and easing by the PBoC engendered limited indirect strength.

Chinese Renminbi Hits 6.30 Versus Dollar After Weekend PBoC Rate Cut

The Chinese Yuan hit a two-and-a-half year low against the US Dollar to start this week. The USDCNH surge was in response to an unexpected policy move by the People’s Bank of China (PBoC) on Saturday. The second cut to the country’s benchmark lending rate in four months (to 5.35 percent) is showing an uncharacteristic preference for broad monetary policy tools where historically the group has used more directed tool. This may be a sign of concern for the country’s economic slowdownand raises the probability of a shift to more unorthodox means.

Canadian Dollar Traders Question Whether BoC Can General More Volatility than RBA

After the tepid follow through from the speculative ranks after the RBA decision, interest surrounding today’s Bank of Canada (BoC) policy meeting is likely to be more reserved. Even before the Australian group surprised with a hold on policy, the market was cooler to the idea that Canadian authorities were going to pursue consecutive rate cuts. Looking at consensus forecasts from Bloomberg-polled economists, 22 percent expect the group to lower the benchmark another 25 percent. That creates a more distinct scenario break for market impact however. Holding will have an even more subtle impact on the Loonie than the RBA did on the Aussie. That said, should they actually cut, a far greater portion of the market would be caught off guard and thereby would need to reposition.

Emerging Markets: Brazilian Real Hits Decade Low Ahead of Rate Decision, Ukraine Raises Benchmark Rate to 30%

The Emerging Markets have seen an exceptionally busy start to the week. While the capital markets measured by the MSCI ETF may not reflect the tumult on the newswires, currencies are proving more sensitive. So far this week, the top news aside from the PBoC rate cut was Ukraine’s announcement that it would lift its benchmark rate from 19.5 to 30 percent in an effort to curb capital outflows. Meanwhile, the Russian Ruble gained 1.0 percent on the Dollar as international coverage over Ukraine moved off financial media outlets’ first pages. In monetary policy news, the Reserve Bank of India (RBI) announced an unexpected 25bp cut to its repo rate to 7.50 percent this morning. The Brazilian Real was the biggest movie on the day with a 1.3 percent drop versus the USD ahead of its own central bank decision (expected to be a 50 bp hike).

Gold Returns to $1,200 but is There Greater Value in a Stimulus-Destabilized World?

Gold lost traction on its record breaking run after the Federal Reserve’s first wave of stimulus leveled off. When the pace of expansion of the central bank’s balance sheet started to level off and its limitations made known, the precious started to lose significant ground. The US Dollar represents the world’s reserve currency, so its debasement was a strong motivation to drive funds already reeling from the Great Financial Crisis to an alternative store of wealth. Today, the Greenback has rallied substantially but many of its most liquid counterparts are attempting to compensate. With the ECB starting a QE program while the BoJ continues with its own and the PBoC makes pre-stimulus moves, the alternative appeal of the precious metal builds. Yet, perhaps that tipping point for a market made skeptical by congestion would be a disaster borne of the world’s cumulative stimulus efforts. From futures we saw open interest more than double from the late-2008 low to late-2010 peak of 651,000 contracts. Today, that interest stands at 407,000 with ETF demand slowly trying to rebuild. Perhaps there is interest/fear.

**Bring the economic calendar to your charts with the DailyFX News App.

ECONOMIC DATA

GMT

Currency

Release

Survey

Previous

Comments

00:01

GBP

BRC Shop Price Index (YoY) (FEB)

-1.2%

-1.3%

Contraction might be contributing to below target inflation growth. The current figure is the most negative since May 2013

00:30

AUD

Australia GDP (QoQ) (4Q)

0.6%

0.3%

GDP growth on a QoQ basis has been trending lower.

00:30

AUD

Australia GDP (YoY) (4Q)

2.5%

2.7%

1:35

JPY

Markit Japan Services PMI (FEB)

51.3

Figures showed a decline from prior figures, but it didn’t move the yen crosses or the Nikkei.

1:35

JPY

Markit Japan Composite PMI (FEB)

51.7

1:45

CNY

HSBC China Composite PMI (FEB)

51.0

Composite PMI has been trending lower since Sep 2014.

1:45

CNY

HSBC China Services PMI (FEB)

51.8

8:45

EUR

Markit/ADACI Italy Services PMI (FEB)

51.4

51.2

Has showed expansion for 10 months in 2014.

8:45

EUR

Markit/ADACI Italy Composite PMI (FEB)

51.4

51.2

8:50

EUR

Markit France Services PMI (FEB F)

53.4

53.4

This measures’ are final figures and not likely to be market moving. President Draghi is having a meeting on Thursday where he might discuss the proposed QE policy.

8:50

EUR

Markit France Composite PMI (FEB F)

52.1

52.2

8:55

EUR

Markit Germany Services PMI (FEB F)

55.5

55.5

8:55

EUR

Markit/BME Germany Composite PMI (FEB F)

54.3

54.3

9:00

EUR

Markit Eurozone Services PMI (FEB F)

53.9

53.9

9:00

EUR

Markit Eurozone Composite PMI (FEB F)

53.5

53.5

9:30

GBP

Markit/CIPS UK Services PMI (FEB)

57.5

57.2

Composite PMI has been trending lower but still shows strong expansion. Economic data has been recently outperforming economists’ expectations.

9:30

GBP

Markit/CIPS UK Composite PMI (FEB)

56.7

10:00

EUR

Retail Sales MoM (JAN)

0.2%

0.3%

Not likely to change the market’s expectation of future ECB monetary policy.

10:00

EUR

Retail Sales YoY (JAN)

2.3%

2.8%

12:00

USD

MBA Mortgage Applications (FEB 27)

-3.5%

A volatile measure.

13:15

USD

ADP Employment Change (FEB)

219K

213K

US labor market has been improving in 2014. This measure might give us an indication of the strength of the NFP numbers.

14:45

USD

Markit US Composite PMI (FEB F)

56.8

Final figures that isn’t likely to be market moving.

14:45

USD

Markit US Services PMI (FEB F)

57.0

57.0

15:00

CAD

Bank of Canada Rate Decision

0.75%

0.75%

The BOC unexpectedly cut interest rates in the last meeting due to concerns over the oil sector.

15:00

USD

ISM Non-Manf. Composite (FEB)

56.5

56.7

US economic data as indicated by the Citi US economic Surprise Index has been underperforming economists’ expectations.

SUPPORT AND RESISTANCE LEVELS

To see updated SUPPORT AND RESISTANCE LEVELS for the Majors, visit Technical Analysis Portal

To see updated PIVOT POINT LEVELS for the Majors and Crosses, visit our Pivot Point Table

CLASSIC SUPPORT AND RESISTANCE

INTRA-DAY PROBABILITY BANDS 18:00 GMT

— Written by: John Kicklighter, Chief Strategist for DailyFX.com

To contact John, email jkicklighter@dailyfx.com. Follow me on twitter at http://www.twitter.com/JohnKicklighter

Sign up for John’s email distribution list, here.

The information contained herein is derived from sources we believe to be reliable, but of which we have not independently verified. Forex Capital Markets, L.L.C.® assumes no responsibility for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person’s reliance upon this information. Forex Capital Markets, L.L.C.® does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. Forex Capital Markets, L.L.C.® shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation losses, lost revenues, or lost profits that may result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results.

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US Dollar May Overlook ADP and ISM, Wait for Payrolls to Trigger Break

Talking Points:

  • US Dollar Follow-Through on ADP, ISM Data Outcomes May Prove Limited
  • British Pound May Ignore Upside Surprise on UK Service-Sector PMI Data
  • See Economic Releases Directly on Your Charts with the DailyFX News App

The economic calendar is relatively quiet in European hours. February’s UK Services PMI reading headlines the docket, with expectations pointing to a slight acceleration in sector activity growth. An upside surprise may be in the cards considering UK news-flow has tended to outperform relative to consensus forecasts over recent weeks. That may not mean much for the British Pound however. Indeed, prices broadly similar outcomes on Manufacturing and Construction PMIs earlier in the week.

Later in the day, the spotlight turns to a busy US data docket. The ADP Employment report is expected to show a 219,000 increase in payrolls in February, marking a narrow improvement from the 213,000 gain in the prior month. Separately, the ISM Non-Manufacturing Composite gauge is forecast to reflect a narrow slowdown in service-sector activity. Finally, the Federal Reserve will release its Beige Book survey of regional economic conditions.

Broadly speaking, realized US data outcomes have increasingly underperformed relative to expected results since late January. That suggests analysts continue to overestimate the vigor of the world’s largest economy and opens the door for further disappointments. Such results may pour cold water on Fed rate hike speculation and weigh on the US Dollar. Follow-through may be limited however as investors wait for the release of Friday’s much-anticipated US Employment report before showing directional commitment.

Currency markets were locked in consolidation mode overnight, with most of the majors oscillating nearly flat on the session. The Japanese Yen narrowly outperformed, adding as much as 0.2 percent on average against its top counterparts. The move tracked a decline on the benchmark Nikkei 225 stock index, pointing to risk aversion as the catalyst behind the advance of the safety-linked currency.

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Asia Session

European Session

Critical Levels

— Written by Ilya Spivak, Currency Strategist for DailyFX.com

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Contact and follow Ilya on Twitter: @IlyaSpivak

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Scalps Target USDCAD Breakout Heading Into BoC, NFPs

Talking Points

  • USDCAD coiled up heading into major event risk this week
  • Scalps favor shorts sub-1.2524 (weekly opening range break to validate)
  • Key Event Risk on Tap

USD/CAD Daily

Scalps Target USDCAD Breakout Heading Into BoC, NFPs

Chart Created Using FXCM Marketscope 2.0

Technical Outlook

  • USDCAD consolidation in focus ahead of major event risk, March opening range
  • Key resistance 1.2646 –bearish invalidation
  • Subsequent resistance objectives at 1.2798 & 1.3063
  • Interim support 1.2420/30 (TL confluence)
  • Key support 1.2250/83 (bullishinvalidation)
  • Event Risk Ahead: Bank of Canada Interest Rate Decision tomorrow & US NFP tomorrow

USD/CAD 30min

Scalps Target USDCAD Breakout Heading Into BoC, NFPs

Notes:A strong GDP release today charged a break of the initial weekly opening range low with the decline rebounding off a Fibonacci support confluence at 1.2420/32. Note that the intra-day momentum signature dropped to its lowest levels since February 12th (after the pair had just failed a breach above the 1.2646 bearish invalidation level) and keeps our immediate bias weighted to the short-side while within the descending pitchfork formation. Note that the weekly opening range now looks to have been set between 1.2432-1.2564 with a break to validate our directional bias.

Bottom line: we’ll be looking to sell rallies while within the confines of this median-line construct with our bearish invalidation level eyed at 1.2524. A break below 1.2420/32 targets more significant support at the confluence of last week’s low & the 61.8% extension of the decline off the late February high at 1.2386/93 and is backed by the February lows 1.2350/61. A quarter of the daily ATR yields profit targets of 31-34 pips per scalp. Caution is warranted heading into key event risk this week with the Bank of Canada rate decision tomorrow and the highly anticipated US Non-Farm Payrolls release on Friday likely to fuel added volatility in CAD & USD crosses.

* It’s extremely important to give added consideration regarding the timing of intra-day scalps with the opening ranges on a session & hourly basis offering further clarity on intra-day biases.

Relevant Data Releases

Scalps Target USDCAD Breakout Heading Into BoC, NFPs

Other Setups in Play:

—Written by Michael Boutros, Currency Strategist with DailyFX

For updates on this scalp and more setups follow him on Twitter @MBForex

To contact Michael email mboutros@dailyfx.com or Click Here to be added to his email distribution list

Join Michael for Live Scalping Webinars on Mondays on DailyFXat 13:30 GMT (8:30ET)

Interested in learning about Fibonacci? Watch this Video

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AUD/USD to Eye 0.7720 Support on Dismal Australia GDP Report

- Annualized 2.5% Expansion in Australia 4Q GDP Would Mark the Slowest Rate of Growth for 2014.

- Will RBA Governor Glenn Stevens Deliver Additional Rate Cuts in 2015?

For more updates, sign up for David’s e-mail distribution list.

Trading the News: Australia Gross Domestic Product (GDP)

The rebound in AUD/USD following the Reserve Bank of Australia (RBA) interest rate decision may quickly unravel should the 4Q Gross Domestic Product (GDP) report heighten bets for another rate cut in the first-half of 2015.

What’s Expected:

AUD/USD GDP

Click Here for the DailyFX Calendar

Why Is This Event Important:

Despite the range-bound price action in AUD/USD, a marked slowdown in the annualized growth figure may fuel bets for lower borrowing-costs and spur a more meaningful move back towards the February low (0.7625) as RBA Governor Glenn Stevens endorses a highly dovish forward-guidance for monetary policy.

Expectations: Bearish Argument/Scenario

Waning business confidence along with slowdown in investments may heighten the bearish sentiment surrounding the Australian dollar, and the range-bound price in AUD/USD may ultimately give way as market participants anticipate the RBA to further embark on its easing cycle.

Risk: Bullish Argument/Scenario

However, the pickup in household spending and building activity may encourage an upbeat GDP print, and a faster rate of growth may limit the RBA’s scope to offer lower borrowing-costs as the economy gets on a firmer footing.

Join DailyFX on Demand for Real-Time SSI Updates!

How To Trade This Event Risk(Video)

Bearish AUD Trade: 4Q GDP Slows to Annualized 2.5% or Lower

  • Need red, five-minute candle following the GDP print for a potential short AUD/USD trade
  • If market reaction favors a bearish trade, sell AUD/USD with two separate position
  • Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward
  • Move stop to breakeven on remaining position once initial target is met, set reasonable limit

Bullish AUD Trade: Australia Growth Report Exceeds Market Forecast

  • Need green, five-minute candle to consider a long AUD/USD position
  • Carry out the same setup as the bearish aussie trade, just in the opposite direction.

Read More:

March Forex Seasonality Sees US Dollar Rally Stunted

Price & Time: Downside Break in the Euro Before Payrolls?

Potential Price Targets For The Release

AUD/USD Daily Chart

AUD/USD Daily Chart

Chart – Created Using FXCM Marketscope 2.0

  • The RBA’s dovish forward-guidance should continue to limit the topside and favors the approach to ‘sell bounces’ in AUD/USD as the Fed remains on course to normalize monetary policy.
  • Interim Resistance: 0.8020 (38.2% expansion) to 0.8040 (61.8% retracement)
  • Interim Support: 0.7720 (161.8% expansion) to 0.7740 (78.6% expansion)

Impact that Australia’s GDP report has had on AUD during the last release

3Q 2014 Australia Gross Domestic Product (GDP)

AUD/USD Chart

The Australia economy grew another annualized 2.7% during the three-months through September following a downward revision to the 3Q GDP figures. The slowdown was largely driven by sliding commodity prices along with a decline in fixed investment. The slowing recovery may put increased pressure on the the Reserve Bank of Australia (RBA) to further assist with the rebalancing of the real economy amid the weakening outlook for global growth. The disappointing GDP prints dragged on the Australian Dollar, with AUD/USD slipping below the 0.8400 handle before ending the day at 0.8407.

— Written by David Song, Currency Analyst and Shuyang Ren

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

To be added to David’s e-mail distribution list, please follow this link.

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GER30 Carves Outside Day, Threatens Bullish Momentum Ahead of ECB

Talking Points:

- GER30 Bearish Outside Day May Force Larger Pullback Ahead of ECB Meeting.

- GBP/USD 1.5300 Support in Focus Ahead of BoE Interest Rate Decision.

- USDOLLAR Struggles Ahead of ADP Employment, ISM-Non Manufacturing.

For more updates, sign up for David’s e-mail distribution list.

GER30

GER30 Daily Chart

Chart – Created Using FXCM Marketscope 2.0

  • Bearish Outside Day (Engulfing) raises the risk of seeing a larger correction in GER30 especially as the Relative Strength Index (RSI) struggles to retain the bullish momentum.
  • Nevertheless, may see risk sentiment track higher following the European Central Bank (ECB) interest rate decision should President Mario Draghi highlight a dovish forward-guidance for monetary policy.
  • Break & close below 11,261 (23.6% retracement) will favor a move into the Fibonacci overlap from 11,122 (100% expansion) to 11,156 (38.2% expansion).

GBP/USD

GBP/USD Daily Chart

  • GBP/USD may continue to track sideways following the failed attempt to push back above former support, while the Bank of England (BoE) is widely expected to retain its current policy in March.
  • Will retain a flat bias for GBP/USD amid the string of closes above 1.5300 (23.6% retracement) to 1.5320 (78.6% retracement), but may see the British Pound outperform against its non-USD counterparts as a growing number of BoE officials prepare U.K. households and businesses for higher borrowing-costs.
  • DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-long GBP/USD since February 26, with the ratio currently standing at +1.31.

Join DailyFX on Demand for Real-Time SSI Updates Across the Majors!

Read More:

Price & Time: GBP/USD Mixed Signals

Australian Dollar Spec Short Position is Largest Since January 2014

USDOLLAR(Ticker: USDollar):

GER30 Carves Outside Day, Threatens Bullish Momentum Ahead of ECBUSDOLLAR Daily Chart

Chart – Created Using FXCM Marketscope 2.0

  • Dow Jones-FXCM U.S. Dollar may chop around in a larger range should it fail to close above 11,826 (61.8% expansion); still waiting for a break of the bearish RSI momentum to favor a larger advance.
  • Outcome of ADP Employment and the ISM Non-Manufacturing report may influence market expectations for Non-Farm Payrolls (NFP) as participants now see employment increasing 235K in February.
  • Lack of momentum to hold/close above 11,826 may spur another test of the range support/February low (11,736).

Join DailyFX on Demand for Real-Time SSI Updates!

Click Here for the DailyFX Calendar

— Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

To be added to David’s e-mail distribution list, please follow this link.

Trade Alongsidethe DailyFX Team on DailyFX on Demand

Looking to use the DailyFX Trade Signals LIVE? Check out Mirror Trader.

New to FX? Watch this Video

Join us to discuss the outlook for the major currencies on the DailyFXForums