Exchange rates underpin the entire forex market, and you’ll need to know how to view, read and understand these rates as you develop your trading skills. Learn more in our guide.

Understanding exchange rates in forex

What is the exchange rate? The exchange rate in forex indicates how much of one currency is required to purchase a fixed amount — or one unit — of another. For example, it may require US$0.6 to purchase A$1, or it will require A$1.47 to purchase US$1. These values are subject to change.

Exchange rates are essentially the foundation of the forex — or foreign exchange — market. When you trade on this market, you will generally be working with a currency pair and speculating on the movement of the exchange rate between the currencies within this pair. One currency in the pair is the base currency — this is the ‘unit’ mentioned above. The other currency in the pair is the quote currency. The exchange rate is how much of the quote, or selling, currency is required to purchase one unit of the base, or buying, currency.

This is also important if you are trading with currency correlations. A currency correlation trade involves speculating of the relative movements of four currencies divided into two pairs. Understanding the exchange rate is critical for opening these more complex positions.

While the evolution of this exchange rate over time is what currency pair trading is based on, it is a factor in other trades too. Whether you are seeking to invest in a foreign market, or simply looking to make a currency trade ahead of an international trip, the exchange rate is something you’ll need to be aware of.

Reading the exchange rate

The exchange rate is measured in pips. Pips in forex refer to small movements of price, which will be at the fourth decimal place for most currency pairs, or at the second decimal place for pairs with quote currencies that have smaller denominations such as the Japanese yen. Observing these pip movements will help you to understand which direction the exchange rate is heading.

So how do you read this rate? It doesn’t matter what platform or service you use; the rate will be expressed in the same way — as a decimal value.

Let’s examine this by looking at the above example. In this case, we can make a currency pair of USD/AUD — the United States dollar is the base currency, and the AUD is the quote currency. This pair would be represented as USD/AUD 1.47 – which means 1.47 units of the AUD are required to purchase one unit of the USD, or A$1.47 per US$1.

Because the forex trading platform deals with a large number of different currencies from all over the world, the exchange rate will always be represented as a pair with the base and quote currencies both displayed. In other trading locations, such as at a physical exchange, you may only see a value for the quote currency. This is because it will be taken as given that the base currency is the local national currency.

How exchange rates are determined

How is currency valued? How are exchange rates determined? These rates are influenced by a wide array of different factors, which combine to make forex trading a complex but exciting endeavour.

Supply and demand is arguably the most obvious factor. If more people are buying a particular currency, and the market supply is not increasing in line with this, then the price of this currency will increase relative to others. If the opposite happens, or if supply outstrips demand for another reason, the price will fall.

Geopolitical factors will also play a major part. The United Kingdom’s exit from the European Union led to a significant fall in the relative value of the British pound, for example. However, it’s difficult to predict these market movements — economic sanctions against the Russian Federation led many to predict a decline for the Russian rouble, but this currency instead rallied against other major global currencies such as the United States dollar.

In this sense, exchange rates are not so much ‘determined’ as they are ‘dictated’ by market forces. There is no central committee overseeing the forex market, and rises and falls happen spontaneously. Even with careful research and forecasting, there are no guarantees in the market, and the exchange rate in FX may not move in the way you expected it to.

Fixed and floating exchange rates

To understand how exchange rates work, you need to recognise the difference between fixed and floating rates. As you learn how to trade forex and become more familiar with the market, you will notice that most currency pairs display a floating exchange rate. This means they are determined according to market forces. When supply and demand fluctuate, the rate of exchange in FX will fluctuate too.

Other currencies may not have a floating rate, but the rate will instead be fixed. This means the central bank of a particular country will peg the value of their own currency to that of another. The central bank achieves this by trading its own currency against its partner — usually the United States dollar but sometimes another form of currency.

The Saudi Arabian riyal is an example of this and will retain the same fixed rate against the United States dollar.

These currencies can still be used for speculation, as they are still subject to market forces. For instance, while the riyal will maintain the same value against the US dollar, it will fluctuate in relation to the European euro or the Japanese yen.

Exchange rates and spreads

Trading on the forex market is not free, and brokers and trading platforms need to secure revenue to keep themselves profitable. This is where forex spreads come into play.

When you view a currency pair and assess the exchange rate, you will notice that the price to buy and the price to sell the pair are not the same. There will be a disparity between the bid price (the buying price) and the ask price (the selling price), which is known as the spread.

Tighter spreads are more favourable for traders, as it reduces the cost associated with opening a position in the market. However, this spread may change over time in response to market forces, and this will have an impact on the cost of keeping each position open.

Exchange rates, leverage and margins

When you trade on the forex market, you will quickly encounter leverage and margins. Leverage in FX means borrowing money from the broker to supplement your own capital, and this will be expressed in a ratio. A position leveraged at 20:1, for instance, will involve borrowing $20 for every $1 of your own money you use to open the trade. Of course, this means the potential benefits of the forex trade increase significantly, but your potential losses increase too – this money will need to be paid back regardless of whether or not the trade is successful.

Margin trading works in a similar way, and you will still be borrowing money from the broker to supplement your own capital. However, the margin will be represented as a percentage. Opening a $1,000 position with a margin of 5% will require you to put up $50 of your own money, while the broker will make up the remaining $9,550. This is basically the same as using a 20:1 leverage to control a $1,000 trade. Again, the potential for profits increases, but so does the risk to the trader.

In both cases, you will incur a margin call if your available funds fall below the margin rate set by the broker. If this happens, you’ll need to close positions to bring your account back into line with requirements, or you’ll need to deposit funds directly. Failing to meet a margin call will result in positions being liquidated.

How does this relate to exchange rates? Well, it’s the movement of the exchange rate that drives the success of the trade. A movement of a few pips may not seem like much, but this can result in a significant rise or fall when leverage and margin trading is involved. If the exchange rate moves too far in an unexpected direction, a margin call may be issued. This means you need to take great care when working with these sorts of trades, implementing stop loss tools to provide additional protection.

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FAQs

What is the forex rate today?

Learning forex means learning to read and predict current and future fluctuations in foreign exchange rates. Trading platforms like the one provided by VT Markets will offer real-time forex data that gives you an exact picture of the currency rate.

Is forex the same as the exchange rate?

Forex stands for foreign exchange, so essentially forex and exchange rates are the same thing. The forex rate will not be exactly in line with the current exchange rate, due to the spreads that brokerage platforms use to generate revenue. However, these spreads will be small in most cases.

How does the exchange rate work in forex?

Exchange rates work according to market forces such as supply and demand. Increased supply that is not met by an equal increase in demand will result in a falling exchange rate. Increased demand without an increase in supply will result in a rising exchange rate. Geopolitical and social factors will also affect the rate of exchange.

US stocks plunged on Tuesday, coming under heavy selling pressure and suffered from their biggest daily losses in more than two years following the release of US Consumer Price Index data. The US annual CPI inflation decelerated to 8.3% yearly in August but was slightly above markets’ estimates of a decline to 8.1%. Therefore, the hotter-than-expected inflation data fueled the bets on a 75 bps rate hike by the Federal Reserve next week and weighed heavily on the equity markets. There is around a 25% chance that the Fed will announce a full 1.0% increase in the benchmark Fed rate on September 21 meeting.

In the Eurozone, the weaker-than-expected German ZEW Economic Sentiment declined to -61.9 in September and deteriorated the market mood. Furthermore, expectations that Russia will hit hard after retreating from some parts of Ukraine also undermined the euro. However, another 75 basis points rate hike from the European Central Bank in October is still on the table.

The benchmarks, S&P 500 and Dow Jones Industrial Average both suffered from heavy losses on Tuesday as a broad-based selloff pushed the equity market down most since 2020 amid the surging US dollar. The S&P 500 was down 4.3% daily and the Dow Jones Industrial Average also declined with a 3.9% loss for the day. All eleven sectors in S&P 500 stayed in negative territory as the Energy and the Utilities sectors are the worst performing among all groups, losing 5.64% and 5.35%, respectively. The Nasdaq 100 meanwhile dropped the most with a 5.5% loss on Tuesday and the MSCI World index was down 3.4% for the day.

Main Pairs Movement
The US dollar staged an impressive rally on Tuesday, regaining upside strength and witnessing its biggest one-day percentage gain since March 2020. The rising US treasury yields have provided strong support to the greenback as the stronger-than-expected US inflation data boosted investor bets that the Federal Reserve will need to stay aggressive in raising interest rates. As for today, the market focus shifts to the US Producer Price Index (PPI) report later in the US session.

GBP/USD retreated sharply on Tuesday with a 1.62% loss as the cable witnessed an intense sell-off towards the 1.150 mark after the release of the US CPI data. On the UK front, investors are awaiting the release of the UK inflation data which might add to the concerns of a recession and soaring jobless claims. Meanwhile, EUR/USD also plummeted and touched a daily low below the 0.9980 mark in the second half of the day. The pair was down almost 1.50% for the day.

Gold licked its wounds with a 1.28% loss for the day after retreating to a daily low around the $1,698 mark during the early US session, as the renewed fears of the Federal Reserve’s aggressive rate hike undermined the safe-haven metal. Meanwhile, WTI Oil remained under pressure and refreshed its daily low near the $85 mark during the US trading session as the hawkish Fed expectations propelled the recession woes on Tuesday.

Technical Analysis

EUR/USD (4-Hour Chart)

EUR/USD started the day with upward momentum, but the pair could not hold on to gains as the U.S. CPI report was released during the early American trading session. U.S. CPI came in at 8.3%, higher than market expectations f 8.1%. The Dollar Index soared more than 1% following the release of the report. Market participants have piled on to the rhetoric of a 75 basis point interest rate hike by the Fed as inflation continues to run high in core areas. Most notably, food and rent went up for August, thus causing the core CPI to rise at an unexpected rate. The strong Dollar, accompanied by the rising U.S. 10-year treasury yield eroded all of the shared currency’s early gains and sent the pair into correction territory.

On the technical side, EUR/USD reversed course slightly below our previously estimated resistance level of 1.0192 and is trending below parity. The short-term support level for the pair remains at 0.9902, however, a strong PPI report from the U.S. could send the Euro-Dollar pair further away from parity. RSI for the pair sits at 44.08, as of writing. On the four-hour chart, EUR/USD currently trades below its 50, 100, and 200-day SMA.

Resistance:  0.9902, 1.0011, 1.0055

Support: 0.9902, 0.985

GBP/USD (4-Hour Chart)

The British Pound attracted bidding during the earlier part of Tuesday’s trading, but the Pound did not stand a chance against the U.S. Greenback as the Dollar was met with a surge of demand following the hotter-than-expected CPI report. Cable reversed course around the 1.173 price region and began trending down as U.S. 10-year treasury yields soared past 3.4%. The British Pound, however, fared better compared to its European peers as the U.K. has yet to announce its monthly CPI figure. The downside for the British Pound could still be unrestricted as the nation faces one of its toughest seasons as winter approaches, and energy prices continue to haunt the residents of Britain. Furthermore, the BoE continues to be hampered by the weak British economy, so raising interest rates could add more pressure on any economic revival.

On the technical side, GBP/USD met fresh resistance at the 1.173 price region. We maintain 1.1463 as Cable’s short-term resistance as the upside for the U.S. Greenback is still yet to be exhausted. A hot CPI report from the U.K. could favour Pound bulls in the short term, but the stronger U.S. Greenback limits any upward momentum for Cable. RSI for the pair sits at 40.9, as of writing. On the four-hour chart, GBP/USD currently trades below its 50, 100, and 200-day SMA.

Resistance: 1.1561, 1.1854

Support: 1.1463

XAU/USD (4-Hour Chart)

Gold prices advanced during early trading on the 13^th. Gold prices were able to rise before the U.S. CPI release as the Dollar continues to exert weakness; however, as the CPI came in above expectations, Gold plunged back to the $1,700 per ounce region. The non-yielding precious metal simply could not compete against U.S. treasury yields, which soared past 3.4% as market participants bet on a rise of short-term interest rates. The 75 basis point interest rate hike now seems all the more certain as core CPI from the U.S. rose unexpectedly. U.S. PPI, which is scheduled to release during today’s American trading session, is expected to show resilient demand and add to the case of a super-size interest rate hike as the next FOMC meeting nears.

On the technical side, XAU/USD has reversed course at our previously estimated resistance level of $1,724 per ounce and has broken below our previous estimated support level of $1,712  per ounce. The next level of support for Gold sits at the $1,695 per ounce price level. RSI for the pair sits at 41.4, as of writing. On the four-hour chart, XAU/USD currently trades below its 50, 100, and 200-day SMA.

Resistance: 1740, 1800

Support: 1712, 1695

Economic Data

US stocks advanced higher on Monday, preserving their bullish momentum and rose four straight days ahead of the key US consumer-price data. The speculations that inflation is near peaking have provided support to the equity markets, as the US CPI data is expected to show headline CPI cooled in August to an 8% a year pace. The falling US dollar also acted as a tailwind for the stock markets despite the firm anticipation that the Federal Reserve will hike interest rates by 75 basis points at its Sept. 20-21 meeting. The upside strength witnessed in equity markets could be linked to the market’s optimism and likely preparations for today’s inflation numbers.

In the Eurozone, the hawkish comments from the European Central Bank (ECB) policymakers and updates that Ukraine is gaining success in pushing back the Russian military from some of its areas have both underpinned the market’s cautious optimism. For today, the final readings of Germany’s August month Harmonized Index of Consumer Prices (HICP) will be crucial for immediate direction.

The benchmarks, S&P 500 and Dow Jones Industrial Average both preserved their bullish strength on Monday as the S&P 500 extended last week’s rally and notched the biggest gain over a four-day span since June. The S&P 500 was up 1.1% on a daily basis and the Dow Jones Industrial Average also advanced with a 0.7% gain for the day. All eleven sectors in S&P 500 stayed in positive territory as the Energy and the Information Technology sectors are the best performing among all groups, rising 1.81% and 1.63%, respectively. The Nasdaq 100 climbed the most with a 1.2% gain on Monday, and the MSCI World index was up 1.3% for the day.

Main Pairs Movement

The US dollar remained under pressure on Monday, extending its previous slide and fell to the lowest level in more than two weeks below the 108 mark amid the risk-on market environment. The news that Ukrainian forces have made significant progress in pushing back Russian troops has favoured investors’ sentiment and exerted bearish pressure on the safe-haven greenback. However, the losses could be limited as the policymakers from the US Federal Reserve and the European Central Bank (ECB) remain hawkish.

GBP/USD climbed higher on Monday with a 0.45% gain as the cable witnessed fresh buying and touched a daily high near the 1.1710 level amid the broad-based US dollar weakness. On the UK front, the recession worries were further fueled by the mostly disappointing UK macro data released earlier this Monday. Meanwhile, EUR/USD also edged higher and touched a daily high above the 1.018 mark in the early European session. The pair was up almost 0.20% for the day.

Gold preserved its upside strength with a 0.44% gain for the day after touching a daily high around the $1,734 mark during the US session, as the falling US dollar underpinned the safe-haven metal’s recovery. Meanwhile, WTI Oil extended its previous rally and refreshed its daily top near the $89 mark during the US trading session amid mixed concerns over the supply and demand of the black gold.

Technical Analysis

EURUSD (4-Hour Chart)

EURUSD rose for the second straight trading day as the shared currency continue to recover from its lowest level since the beginning of the year. The shared currency took advantage of the broad-based selling of the U.S. Greenback. Markets seem to have already priced in a supersized 75 basis point interest rate hike at the next FOMC policy meeting, which is set to happen on the 20th and 21st of September. The U.S. 10-year treasury yield also saw a decline during Monday’s trading as risk-on sentiment returns to equity markets. Market participants will now turn their attention to the U.S. CPI release, scheduled during today’s American trading session.

On the technical side, EURUSD has broken above our previously estimated resistance level of around 0.9902 and 1. We project the next level of resistance to sit around the 1.019 price region and the previous resistance level at 10055 would change in polarity and act as a near-term support level for the pair. RSI for the pair sits at 60, as of writing. On the four-hour chart, EURUSd currently trades above its 50, 100, and 200-day SMA.

Resistance:  0.9902, 1.0011, 1.0055

Support: 0.9902, 0.985

GBPUSD (4-Hour Chart)

Cable extended its winning streak into the new trading week as broad-based selling surrounded the U.S. Greenback. An upbeat market sentiment surrounding equities also allowed the British Sterling to find a demand that has seemingly gone away for months. The short-term reversal of Cable should be taken with caution, as the U.K.’s National Statistics revealed GDP growth below market estimates. A weak British economy combined with an ongoing energy crisis could further hinder any monetary tools that the BoE could utilize in order to reign in inflation. Market participants should note that the BoE has postponed its interest rate announcement by a week to September 22nd. A better-than-expected CPI figure from the U.S. could send Cable back into a correction trajectory.

On the technical side, GBPUSD has broken above our previously estimated resistance level of 1.1561 but is still trading below our secondary resistance level of 1.1854. The support level for GBPUSD continues to sit at 1.1463. RSI for the pair sits at 65.43, as of writing. On the four-hour chart, GBPUSD currently trades above its 50 and 100-day SMA, but below its 200-day SMA.

Resistance: 1.1561, 1.1854

Support: 1.1463

XAUUSD (4-Hour Chart)

Gold prices continue to recover for the second straight trading day as the Dollar index dives to a monthly low of below 109. As markets have now seemingly priced in the 75 basis point interest rate hike by the FOMC, the Dollar has entered a cycle of exhausted demand; however, with U.S. CPI scheduled to be released during the American trading session, the U.S. Dollar could be met with a fresh demand. Risk on sentiment across equity markets has made the case for a weaker Dollar and thus room for the yellow metal to gain back some lost ground. Market participants should be aware while Gold was able to gain more than 1% in the past two days, Gold prices have mainly depended on the weakness of the Dollar to rise; however, with inflation still acting as an economic headwind around the world, the non-yielding Gold provides little to no upside for longer-term investing horizons.

On the technical side, XAUUSD has broken above our previously estimated resistance level of $1,724 per ounce and is heading toward the next level of resistance at $1740 per ounce. A fresh short-term support level for Gold has formed around the $1712 per ounce price level. RSI for the pair sits at 59, as of writing. On the four-hour chart, XAUUSD currently trades above its 50-day SMA, but below its 100, and 200-day SMA.

Resistance: 1740, 1800

Support: 1712, 1695

Economic Data

US stocks advanced higher on Friday, witnessing impressive daily gains and preserving its bullish momentum amid the risk-on market sentiment. The markets seem to have priced in a supersized 75 bps rate hike at the September FOMC meeting as the bets for an aggressive monetary tightening were reaffirmed by Fed Chair Jerome Powell, who said on Thursday that the Fed needs to keep going until it brings the inflation down. Looking ahead, markets will be focused on the August consumer-price index that will release this Thursday, which is seen as one of the key reports before the Fed rate decision on September 20-21. In the Eurozone, the hawkish comments from ECB officials provided a boost to the euro, as ECB policymakers Peter Kazimir and Klaas Knot said that their priority was policy normalization and added that they had no other option than to continue with resolute rate hikes. The ECB’s 75 bps rate hike announcement has also trimmed the Fed-ECB policy divergence.

The benchmarks, S&P 500 and Dow Jones Industrial Average both gained positive traction on Friday as the S&P 500 topped its 100-day average and snapped a three-week losing streak. The S&P 500 was up 1.5% on a daily basis and the Dow Jones Industrial Average also advanced with a 1.2% gain for the day. All eleven sectors in S&P 500 stayed in positive territory as the Communication Services and the Energy sectors are the best performing among all groups, rising 2.53% and 2.38%, respectively. The Nasdaq 100 climbed the most with a 2.2% gain on Friday, and the MSCI World index was up 1.7% for the day.

Main Pairs Movement

The US dollar suffered daily losses on Friday, coming under heavy selling pressure and retreating further from a two-decade high near the 110 mark amid the risk-on impulse across the board. However, the aggressive Fed rate hike bets and elevated US Treasury bond yields should help limit any meaningful US dollar corrective slide. The market focus now shifts to US CPI data as a consecutive decline in the headline report will confirm that the inflationary pressures are responding inversely to the higher interest rates by the Fed.

GBP/USD surged on Friday with a 0.75% gain as the cable caught aggressive bids and climbed to a near two-week high amid the broad-based US dollar weakness. On the UK front, the new UK Prime Minister Liz Truss’s plans to cap energy bills for the next two years continued to provide support to the cable. Meanwhile, EUR/USD also advanced sharply and touched a daily high above the 1.010 mark in the early European session. The pair was up almost 0.50% for the day.

Gold advanced higher with a 0.50% gain for the day after touching a daily high above the $1,728 mark during the European session, as the falling US dollar helped the safe-haven metal to find demand. Meanwhile, WTI Oil staged a goodish rebound and refreshed its daily top above the $87 mark during the US trading session, as Russia’s threat to cut oil flows has raised concerns about tight global supply.

Technical Analysis

EURUSD (4-Hour Chart)

EURUSD surged during the early trading of the Asia trading session. ECB president Christine Lagarde’s remarks on Friday provided some comfort for Euro bulls after the substantive ECB 75 basis point interest rate hike. President Lagarde pointed out that quantitative tightening would not be a norm moving forward; furthermore, the ECB’s stance remains focused on policy normalization. The weaker U.S. Greenback on Friday allowed Euro bulls to bid EURUSD above parity in more than three straight trading sessions. On the economic docket, the U.S. will release CPI and PPI figures on Tuesday and Wednesday. EU CPI data is scheduled to be released on the 16^th.

On the technical side, EURUSD broke above our previously estimated resistance level at 1.0011, but we project this level to hold for the near future. The support level remains at 0.9902. RSI for the pair sits at 49, as of writing. On the four-hour chart, EURUSD currently trades below its 50, 100, and 200-day SMA.

Resistance:  0.9902, 1.0011, 1.0055

Support: 0.9902, 0.985

GBPUSD (4-Hour Chart)

Cable advanced strongly during the early trading hours of the Asia trading session. GBPUSD was able to cling to daily gains as the American trading session. U.K.’s new Prime Minister Liz Truss announced a two-year energy price guarantee that would put a ceiling on household energy bills. The bill is expected to cost British taxpayers more than 20 billion Pounds down the road. The weakened Dollar further allowed the Pound to advance. On the economic docket, the U.K. is set to release GDP figures and Manufacturing Production figures on the 12th, CPI data on the 14th, and the BoE is scheduled to announce interest rate decisions on the 15th; however, due to the passing of Queen Elizabeth II, Britain’s public sector could be affected and report dates could be postponed.

On the technical side, GBPUSD climbed to a weekly high of 1.164 during the European trading session but faced resistance soon. A new short-term support level for Cable sits at around the 1.15584 price level. Long-term support for GBPUSD sits at 1.1463. RSI for the pairs sits at 57.72, as of writing. On the four-hour chart, GBPUSD currently trades above its 50, 100, and 200-day SMA.

Resistance: 1.1561, 1.1854

Support: 1.1463

XAUUSD (4-Hour Chart)

The non-yielding yellow metal advanced slightly amid a weaker U.S. Greenback. After touching its two-decade high, the Dollar index retreated below the key 110 level. Short-term selling of the U.S. Greenback is not likely to become a pattern as the Fed remains hawkish and is willing to increase the pace of tightening. Expectations of a 75 basis point interest rate hike by the Fed during the next FOMC have increased significantly after the better-than-projected jobs released during the previous week. The 13th and 14th could be volatile for XAUUSD as the U.S. is set to release CPI and PPI figures, which are both critical indicators for the Fed’s rate hike considerations.

On the technical side, XAUUSD has touched our previously estimated resistance level at the $1,762 per ounce price level and began retreating. The short-term support level for the precious metal remains at $1,688 per ounce. RSI for the pair sits at 43.71, as of writing. On the four-hour chart, XAUUSD currently trades below its 50,100, and 200-day SMA.

Resistance: 1762, 1800

Support: 1688.129, 1695

Economic Data

This week, investors will be eyeing inflationary data from the US, UK and Australia. 

The US will release its Consumer Price Index (CPI), Producer Price Index, and Retail Sales data. The market will be watching closely after more neutral labour data were released last week and after the Fed raised interest rates by 0.25%. 

The UK will also release data on CPI, GDP. Australia will release its employment data.

Image source: forexfactory.com

UK Gross Domestic Product | 12 September 2022

Gross domestic product in the UK shrank 0.6% in June from the previous month, following a downwardly revised 0.4% rise in May, according to data released by the Office for National Statistics on 12 September. Economists polled by Bloomberg expected an unchanged reading for July.

US Consumer Price Index | 13 September 2022

In July, consumer prices in the United States held steady from June, following a 1.3% jump in the previous month, which was the most significant rise since January 1992. Analysts expect consumer prices to slow slightly in July, falling 0.1%.

UK Consumer Price Index | 14 September 2022

The annual inflation rate in the United Kingdom reached 10.1% in July of 2022, up from 9.4% in the previous month. Experts predict it will fall below 10% again by the end of the year.

US Producer Price Index | 14 September 2022

In July, US producer prices unexpectedly fell 0.5% month-on-month, following a downwardly revised 1% rise in June. The decline in producer prices was driven by lower costs for agricultural products and energy. Producer prices are forecast to increase by 0.1% for August, after increasing 0.2% in July.

New Zealand Gross Domestic Product | 15 September 2022 

New Zealand’s economy declined 0.2% in the March 2022 quarter, following a 3% rise in the previous period. Analysts expect the economy will improve by 1.5% for the second quarter.

Australian Employment Data | 15 September 2022

Australia’s job market unexpectedly declined in July by 40,900 to 13.56 million; the nation’s unemployment rate dropped to 3.4%, a new record low. We can expect employment to remain positive and the unemployment rate to hold steady in August.

US Retail Sales | 15 September 2022

Markets were disappointed by a 0.1% decrease in retail sales in the US in July 2022, but they expected a 0.2% increase this month.

In July 2022, retail sales unexpectedly stalled in the US, disappointing markets that expected a 0.1% increase. This month, economists expect a 0.2% increase in retail sales figures.

Jerome Powell, the chairman of the Federal Reserve, reaffirmed the bank’s commitment to combating price increases and remaining upbeat until inflation returns to the Fed’s 2 percent objective on Thursday. Following Powell’s reiteration of the necessity of combating high inflation, the stock market ended a choppy session with solid gains.

The Nasdaq increased by 0.6% and maintained a positive performance. The S&P 500 increased by 0.7%. The Dow Jones Industrial Average added 0.6%. Small caps held up slightly better than the other indexes, with the Russell 2000 index rising 0.8%.

Invesco QQQ Trust (QQQ), which tracks the Nasdaq 100, managed to gain 0.5% despite key Nasdaq companies including Apple (AAPL), Microsoft (MSFT), and Alphabet (GOOGL) trading lower.

Early data showed that NYSE volume increased by 4.1% and Nasdaq volume increased by 0.4%.

The price of crude oil increased by 0.9% to $82.66 per barrel. Natural gas continued to rise, up 1.5%.

Queen Elizabeth II, whose reign took Britain from the age of steam to the era of the smartphone, and who oversaw the largely peaceful breakup of an empire that once spanned the globe, has died. She was 96. She died peacefully at her estate in Balmoral, Scotland on the afternoon of Sept. 8, according to a statement from Buckingham Palace.

Ascending the throne in 1952, Elizabeth led the UK through a time of political upheaval. She began her reign as head of an empire, albeit one in decline. By the time of her death, the future of the UK itself was in doubt, with recurrent calls for independence in Scotland and Britain’s exit from the European Union leading to renewed tension in Northern Ireland. Her eldest son, Prince Charles, was heir to the throne.

Main Pairs Movement

After a turbulent day, the dollar ended the day in a mixed state across the FX board. The European Central Bank increased rates by 75 basis points as anticipated, leaving the EUR/USD pair little altered and close to parity.

The Canadian dollar surged against the greenback, with the pair trading at around 1.3090 as BOC officials reiterated more rate hikes are on the docket as inflation remains stubbornly high. The Australian dollar extended its decline against its American rival on Wednesday, with AUD/USD falling to 0.6698 before recovering, now ending the day near a daily high of 0.6750.

While the USD/JPY pair is stable at about 144.00, the USD/CHF pair fell and is currently trading at roughly 0.9700. While crude oil prices saw minor gains, with WTI closing the day at $83.25 a barrel, gold prices posted losses for the day, ending at about $1,708 a troy ounce.

US Treasury yields increased somewhat for the day’s conclusion. The yield on the 10-year note is at 3.29%, which is almost high enough to spark demand for the dollar.

Technical Analysis

EURUSD (4-Hour Chart)

EURUSD experienced a new packed trading day. The ECB hiked interest rates by 75 basis points, in line with market expectations. However, the ECB also upwardly revised inflation projections for 2022, 2023, and 2024. The interest rate hike allowed EURUSD to trade above parity. During the American trading session, the U.S. initial jobless claims reports came in better than expected, thus sending Dollar demand to new heights as market participants added on bets of a 75 basis point interest rate hike by the Fed. During Fed chair Jerome Powell’s speech, he reinstated the Fed’s hawkish stance, which sent short-term treasury yields back above the 3.3% mark. Further upside for the Euro remains limited as the ECB struggles to keep inflation in check while stimulating positive economic growth amid multiple externalities weighing on the European economy

On the technical side, EURUSD has met a new resistance level at around the parity mark. Short-term support levels remain unchanged at the 0.9902 price level. RSI for the pair sits at 49.8, as of writing. On the four-hour chart, EURUSD currently trades below its 50, 100, and 200-day SMA.

Resistance:  0.9902, 1.0011, 1.0055

Support: 0.9902, 0.985

GBPUSD (4-Hour Chart)

Cable saw a surge in bidding during the start of the European trading session. Market participants tuned in to BoE’s chief economist Huw Pill, who noted that if the central bank observes tightening the central bank would be willing to slow down its pace of tightening. The surprised dovish tone from the BoE allowed the British Pound to gain traction; however, all gains by the Sterling would be erased at the start of the American trading session. The U.S. released better than expected initial jobless claims figures, which boosted the odds of a 75 basis point interest rate hike by the Fed. Stepping away from economics, Britain’s longest reigning monarch, Queen Elizabeth II passed away at the age of 96.

On the technical side, Cable has once again successfully defended our previously estimated support level of 1.1463; however, Cable has displayed a rather strong downward trend thus market participants should be aware of a break below 1.14. RSI for the pair sits at 42.44, as of writing. On the four-hour chart, Cable currently trades below its 50, 100, and 200-day SMA.

Resistance: 1.1561, 1.1854

Support: 1.1463

XAUUSD (4-Hour Chart)

Gold prices advanced during early trading on the 8^th, but the non-yielding yellow metal could not retain gains as the American trading session began. The rise in Gold prices, recently, has been entirely dependent on the weakness of the U.S. Greenback; however as better than expected initial jobless claim report was announced, bidding for the Dollar resumed and sent Gold lower towards the $1700 per ounce price level. With a new round of interest rate hikes just on the horizon, Gold prices remain pessimistic as market participants attempt to find any type of yield in other asset classes.

On the technical side, XAUUSD touched our previously estimated resistance level of $1,724 per ounce during the European trading session and soon entered a correction toward the $1,700 per ounce price level. The short-term support level remains at $1695.42 per ounce. RSI for the pair sits at 45.98, as of writing. On the four-hour chart, XAUUSD currently trades below its 50, 100, and 200-day SMA.

Resistance: 1762, 1800

Support: 1688.129, 1695

Economic Data

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帕罗奥图网路公司即将在 2022 年 09 月 14 日 进行股票分割。
届时，帕罗奥图网路公司的股票（PANW）将会以分割后的合约提供投资者交易。

股票分割的客户须知：

1. 每个客户的PANW持仓量将变为 3 倍。

2. 所有PANW仓位的「开仓价格」与「止盈 / 止损设置价格」将会在股票分割后，变为原始价格的 3 分之 1。

3. 帕罗奥图网路公司即将在 2022 年 09 月 13 日收盘时以 3 分之 1 的比例进行股票拆分。
2022 年 09 月 14 日拆分完成后的报价预计将落在 09 月 13 日收盘价格的 3 分之 1。

4. 股票分割时，所有的PANW挂单设置将会被取消。

5. 「模拟账户」内所有的PANW仓位将会因股票分割而关闭。

注意：以上数据仅供参考，实际执行数据有可能会有变动，具体请依据MT4/MT5软件为准。

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US stocks advanced higher on Wednesday, climbing the most in about a month as the global bond market selloff takes a break. The equity market witnessed fresh upside strength after the release of the minutes from the Federal Reserve (Fed) Beige Book, which showed that price growth has slowed in 9 of the 12 districts and also indicated that economic activity was unchanged but the outlook for future economic growth remained generally weak. Investors tend to wait for the September 13th inflation report as the economic momentum could only improve if inflation continues to soften.

In the Eurozone, the European Central Bank will announce its monetary policy decision on Thursday, which is widely anticipated to hike rates by 50 bps but the focus will be on whether European policymakers are willing to put growth behind taming inflation or not. Skyrocketing prices in the Eurozone are taking their toll on households and businesses and pushing high inflation up amid the European energy crisis.

The benchmarks, S&P 500 and Dow Jones Industrial Average both staged a goodish rebound on Wednesday as the improving market sentiment and the retreating US dollar provided support to the equity markets. The S&P 500 was up 1.8% on a daily basis and the Dow Jones Industrial Average also advanced with a 1.4% gain for the day. Ten out of eleven sectors stayed in positive territory as the Utilities and the Consumer Discretionary sectors are the best performings among all groups, rising 3.14% and 3.08%, respectively. The Nasdaq 100 meanwhile climbed the most with a 2.1% gain on Wednesday and the MSCI World index was up 1.1% for the day.

Main Pairs Movement

The US dollar suffered daily losses on Wednesday, failing to extend its previous rally and retreated towards the 109.5 area during the American session amid a slightly risk-on impulse across the board. The Fed Beige Book also reported that some firms see some easing in labour shortages and price pressures. As for now, Investors expect a hawkish commentary from Fed Powell on interest rates as price pressures are still high.

GBP/USD was little changed on Wednesday as the cable remained under pressure near March 2020 low amid the less-hawkish Bank of England. On the UK front, the BoE policymakers failed to reinforce bets for a 75 bps September rate hike during the Monetary Policy Report Hearings. Meanwhile, EUR/USD advanced sharply and extended the intra-day rally towards the 1.000 area ahead of the ECB’s rate decision. The pair was up almost 1.05% for the day.

Gold surged with a 0.95% gain for the day after touching a daily high above the $1,718 mark during the US trading session, as the yellow metal marked the biggest daily gains in over a week amid a pullback from the 20-year high witnessed in the US dollar. Meanwhile, WTI Oil continued to suffer heavy losses and refreshed its daily low below the $82 mark in the late US trading session, as the speculation about easing Chinese demand following tepid local data kept weighing on the oil price.

Technical Analysis

EURUSD (4-Hour Chart)

EURUSD enjoyed a surge in demand over the course of the previous trading day. The shared currency saw increased bidding as market participants await the ECB’s monetary policy decision, which is scheduled during the late European trading session of today. Markets are currently pricing in a 50 basis point interest rate hike by the ECB; however, interest rate hikes could pose further pressure on a deflating European economy. In addition to a slowing economy, Europe now faces further energy price instability as the Nordstream 1 pipeline halts its supplies. The initial jobless claims figure from the U.S. is also scheduled to be released during today’s American trading session.

On the technical side, EURUSD has successfully defended our previous estimated support level of 0.9902. The short-term bounce of the pair will meet its near-term resistance at around the 0.9983 price region. RSI for the pair sits at 52, as of writing. On the 4-hour chart, EURUSD currently trades below its 50, 100, and 200-day SMA.

Resistance:  0.9902, 1.0033, 1.0055

Support: 0.9902, 0.985

GBPUSD (4-Hour Chart)

Cable traded lower over the course of Wednesday’s trading. The British Pound met strong selling pressure at the start of the Asia trading session. Remarks from members of the BoE further added to the selling pressure. BoE policymakers are still debating whether a further interest rate hike is necessary and some are arguing for a more gradual rate hike in order to prevent over-tightening as the British economy continues to falter. The strong U.S. Greenback further limits any upward movement for the British Pound. Market participants will now turn their attention to the U.S. initial jobless claims figure, scheduled to be released during today’s American trading session. A worse-than-expected initial jobless claims figure could ease bets of a 75 basis point interest rate hike by the Fed and allow the British Pound some breathing room.

On the technical side, GBPUSD has touched our previously estimated support level of 1.1463 and is currently trading around that price region. The next level of support for Cable sits at around the 1.13 price region. RSI for Cable sits at 41, as of writing. On the four-hour chart, GBPUSD currently trades below its 50, 100, and 200-day SMA.

Resistance: 1.1561, 1.1854

Support: 1.1463

XAUUSD (4-Hour Chart)

Gold traded higher over the course of Wednesday’s trading. The non-yielding metal took advantage of a weaker Dollar and was able to find footing above the $1700 per ounce price level. The U.S. Greenback saw a broad-based sell-off as short-term treasury yields retreated below 3.3%. However, as the next FOMC nears, market participants should be aware that the Dollar-denominated and non-yielding metal could see further price depreciation. Furthermore, with the ECB slated to increase interest rates by 50 basis points, demand for the yellow metal is expected to fall even further. A return to normalcy could be on the horizon as breakthroughs in antibody research against COVID-19 have been announced by Duke University. A reverse in risk sentiment could send Gold below the $1650 price level.

On the technical side, XAUUSD has rebounded from our previously estimated support level of $1695 per ounce and is trending toward our estimated short-term resistance level of $1724 per ounce. RSI for XAUUSD sits at 51.7, as of writing. On the four-hour chart, XAUUSD currently trades below its 50, 100, and 200-day SMA.

Resistance: 1762, 1800

Support: 1688.129, 1695

Economic Data

US stocks edged lower on Tuesday, seesawing between gains and losses along the session but gave up ahead of the close amid the bets that the Federal Reserve will stay hawkish on policy tightening. On top of that, recession fears still remained amid the escalating energy crisis, but UK Prime Minister Liz Truss has announced energy bail-outs to cope with the crisis that affects all of Europe. On the economic data side, the US ISM Services PMI improved to 56.9 in August, which came higher than the market’s expectations and showed a slight uptick in the services sector due to increases in business activity. In the Eurozone, the conflict with Russia, which cut all gas provision to Europe, acted as a headwind for the euro and exerted bearish pressure on the market sentiment.

The benchmarks, S&P 500 and Dow Jones Industrial Average both suffered slight losses on Tuesday as the recession fears and the hawkish Fed expectations continued to weigh on the equity markets. The S&P 500 was down 0.4% on a daily basis and the Dow Jones Industrial Average also dropped with a 0.5% loss for the day. Seven out of eleven sectors stayed in negative territory as the Communication Services and the Energy sectors are the worst performing among all groups, losing 1.26% and 1.08%, respectively. The Nasdaq 100 fell the most with a 0.7% loss on Tuesday and the MSCI World index was down 0.5% for the day.

Main Pairs Movement

The US dollar advanced higher on Tuesday, preserving its upside traction amid upbeat US ISM Services PMI data. The DXY index was surrounded by bullish momentum for most of the day and touched a daily top near 110.5 level, but then retreated back slightly to erase some daily gains. A surprising improvement in the Services PMI helped the safe-haven greenback to find demand, which printed a fresh two-decade high at 110.55. Investors now waiting for the speech from Fed Chair Jerome Powell scheduled on Thursday.

GBP/USD is little changed on Tuesday as the market focus shifts to speeches from central banks. On the UK front, after securing the position of next UK Prime Minister, Liz Truss is continuously announcing relief packages for households against soaring inflation after securing the position of next UK Prime Minister. The GBP/USD pair climbed to a daily high above the 1.160 mark, but failed to preserve its upside traction and surrendered its early gains. Meanwhile, EUR/USD remained under bearish pressure and extended the slide towards 0.988 amid the escalating energy crisis. The pair was down almost 0.23% for the day.

Gold declined with a 0.50% loss for the day after dropping to a daily low near the $1700 mark during the US trading session, as the stronger US dollar across the board and upbeat US PMI data both dragged the precious metal lower. Meanwhile, WTI oil came under selling pressure and retreated to the $86 area during the second half of the day, as markets worried that high inflation and interest rate hikes will hit oil demand.

Technical Analysis

EURUSD (4-Hour Chart)

EURUSD saw large price movements as economic data from the U.S. and the E.U. were released. The shared currency enjoyed demand early in the trading day, but EURUSD could not hold on to gains as Germany published its July Factory orders, falling by 1.1% month over month and 13.6% year over year. The dismay economic data from Germany was exacerbated by the upbeat PMI data, which was released at the opening of the American trading session. The two key economic data sent EURUSD below the 0.99 level. The worse than expected Germany factory orders figure adds further concern to the E.U.’s economic outlook.

On the technical side, EURUSD has successfully defended our previous estimated support level of 0.9902; however, we do expect EURUSD to travel further lower to the 0.98 price region in the near future. RSI for the pair sits at 42.1, as of writing. On the four-hour chart, EURUSD currently trades below its 50, 100, and 200-day SMA.

Resistance:  1.0033, 1.0055, 1.0082

Support: 0.9902, 0.985

GBPUSD (4-Hour Chart)

GBPUSD enjoyed early gains during the Asia trading session, as market participants embrace a new British Prime Minister. Prime Minister Liz Truss has promised to deal with the energy crisis and intends to cut taxes in order to grow the slowing economy. However, Cable lost ground as soon as the better-than-expected PMI figure was released during the American trading session. Market participants will now turn their attention to the BoE’s statement, scheduled during today’s European trading session. Despite Cable’s retreat, the British Pound has outperformed its G10 peers against the American Greenback.

On the technical side, we remain confident that the 1.1463 price level will support Cable in the short term. The short-term resistance level remains around the 1.1561 price region. RSI for Cable sits at 44.787, as of writing. On the four-hour chart, GBPUSD currently trades below its 5, 100, and 200-day SMA.

Resistance: 1.1561, 1.1854

Support: 1.1463

XAUUSD (4-Hour Chart)

After seeing a rise in Gold prices over the course of Monday’s trading, Gold has once again resumed its downward trend. The U.S. Greenback continues to be more attractive compared to the non-yielding precious metal. After the release of the U.S. non-manufacturing PMI, Gold entered a downwards spiral towards the $1700 per ounce price region. The rise in U.S. 10-year treasury yields has further added selling pressure on the yellow metal. The energy crisis and the price surge it accompanies have pulled market participants away from XAUUSD.

On the technical side, XAUUSD hit our previously estimated resistance level of $1724 per ounce and began retracing toward our estimated support level of around $1695 per ounce. RSI for Gold sits at 40.84, as of writing. On the four-hour chart, XAUUSD currently trades below its 50, 100, and 200-day SMA.

Resistance: 1762, 1800

Support: 1688, 1695

Economic Data

Understanding leverage trading

What is leverage in forex? Leverage trading is a way to increase your exposure to market forces when you deal in foreign currency pairs. The forex market works according to laws of risk and reward — the greater the risk, the greater the potential reward. Therefore, the higher the leverage rate, the higher the potential return. However, this also increases the potential loss.

When you leverage a forex trade, you essentially borrow capital to supplement your money. Forex currency pairs move in pips — pips in forex are minimal price movements, so un-leveraged positions can only result in small profits and losses. By borrowing additional capital for leverage, you increase how much each pip movement is worth.

For example, if you trade with a leverage of 1:10, you are borrowing $10 for every $1 you put forward, and each pip is worth 10x the amount it would be without leverage. You will still need to pay this $10 back once you close your trade, which will be taken out of the profits of a successful position. You’ll need to pay this amount back if your position fails. This is why traders must be cautious and ensure they take the time to learn forex techniques before extending the leverage on their positions.

Calculating the leverage ratio

Leverage is generally represented as a ratio — for example, 1:10. The number on the left of the ratio represents the money you will put forward from your capital. In contrast, the number on the right represents the proportion you will borrow. With a 1:10 trade, you can use $100 of your own money to control a position of $1,000. With a 1:100 trade, this $100 will allow you to control a position with $10,000.

It’s important not to get carried away with leverage trading. Stick to your strategy, and only choose a leverage ratio you feel comfortable with. Don’t be tempted to push the boundaries, and stick to manageable levels of risk.

How to trade with leverage

The key benefit of forex leveraging is the profit potential, but you need a strong strategy if you are to stand a chance of realising this potential. This means understanding your risk tolerance and how much you are willing to borrow on your trade. Next, you’ll need to select a currency pair that best suits your strategy and choose a leverage ratio that aligns with your targets. Once these preliminary steps are complete, you can start to trade with leverage.

• Put protective measures in place

Before opening your forex position, you need to have some protective measures. These tools will help you maintain a sustainable approach to trading and ensure that your position remains within strict parameters. The main tools you will use take profit and stop loss, and you may use these with other forex trading techniques such as FX futures. 

• Take profit

Take profit will automatically close the trade once a certain profit level is reached. With forex trading, mainly leverage trading, you are not simply trying to achieve the maximum level of return from each position. Instead, you want to ensure that your profits remain within your broader strategy. This tool helps ensure your profits don’t reach unsustainable levels and you stay on track for long-term growth.

• Stop loss

Stop loss works the same way as taking profit but in the opposite direction. This tool enables you to set a loss limit. If your position struggles and falls to this limit, it will automatically be closed, and you will absorb the losses. The tool ensures that losses do not become unmanageable and helps you keep within the initial strategy’s limits.

• Open your position

Once you have chosen your leverage ratio and set your take profit and stop loss tools, you can open your position based on the current spot trading price. Open a buying position if you believe the currency pair’s value will increase, or open a selling position if you think it will fall in value. You should have a strategy for how long you expect to keep the position open.

• Close your position

When you reach your predetermined endpoint for the position, you can close it. This means the position is no longer exposed to market forces, and you will take any profits and absorb any losses incurred while it remains open. You now need to pay back the capital you leveraged on the position, whether you made a profit or not.

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FAQs

What is a good leverage in forex?

It’s difficult to say what is a good level of leverage in forex simply because this is a personal choice for individual traders. A good rule of thumb for traders is to start small and work exclusively with manageable leverage levels. While increasing your leverage allows you to achieve greater profits, it also increases your exposure to risks and losses.

If you are new to trading with leverage, you should use 10:1 leverage as an absolute maximum. This means you put $1 of your capital forward and use leverage to borrow $10. Consider using lower leverage when you are starting or unsure, but never exceed this level.

What is 1 to 500 leverage?

1 to 500, commonly represented as 500:1, is a very high leverage ratio. In this example, you borrow $500 for every $1 you put forward from your capital reserves. While this is great if your trade is successful, as you are essentially multiplying your profits by 500, it exposes you to a very high level of risk. Even if you opened trade with only $10, you would need to borrow $5,000 to use as leverage, and this $5,000 will need to be paid back whether the trade is successful or not. This means if your trade fails, you could find yourself in a significant amount of debt.

This rate of 1 to 500 is typically the maximum level of forex leverage traders are permitted to use. Most traders will not open positions with this sort of leverage.

Can I use leverage in forex as a beginner?

Anyone can use leverage when they trade forex. However, it’s essential to understand that forex significantly increases your trade risk. As noted above, beginner traders should keep their rate of leverage low and manageable, limiting their exposure while they get used to this trading technique.

Using a demo account is even better for beginners wondering how to trade forex with leverage. With a demo account, you can practice using leverage just like an actual trade, except there is no risk because you are neither putting forward any money nor borrowing any. You can’t make a profit from a demo account, but you can learn valuable techniques that will help you further down the line.

Is it possible to trade forex without leverage?

Yes, it is possible to trade forex without leverage. You can put forward your own money without borrowing or leveraging any additional capital. This reduces your risk exposure but also reduces your exposure to profits. Traders who do not use leverage will have to make massive amounts of successful trades or put forward a high level of capital before they start to make significant profits.

With this in mind, most traders use little leverage when they trade. As they get more accustomed to using this, they can gradually increase their risk profile to increase profit potential. Of course, there are no guarantees, and even experienced traders can lose money when leveraging. Other forex strategies, such as OTC derivatives like FX forwards, do not always require leverage, although traders do have the choice of opening a structured leveraged forward contract.

How do I reduce risk when trading forex with leverage?

It is possible to manage and reduce risk while leverage trading. The most effective way to reduce risk is to keep the leverage ratio low. If you are leveraging at 5:1, you stand to lose considerably less money on a failed position than if you were leveraging at 20:1. Traders are always looking for the sweet spot of optimal risk exposure without trading in an irresponsible and unsustainable fashion.

Another way to reduce risk is to grow your experience slowly over time. Get used to trading on a demo account and then practice leverage trading with live positions, using small amounts of leverage at first as you develop your understanding. This helps to foster a sustainable approach to this trading strategy.

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