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Trading Concepts
Contents
The U.S. dollar is the official currency for the United States. 87% of all currency transactions involve the U.S. dollar. Not only is it the world’s primary reserve currency, but the currencies of more than 25 countries are pegged to the U.S. dollar.*
* Bank of International Settlements 2013 Triennial FX Report
A. TRADING MECHANICS
Quote Convention: USD
Symbol: $ or US $
Currency Nicknames: Greenback, Buck
Fun Fact: The USD is used as the official currency not only in the US, but also in the British Virgin Islands, Caribbean Netherlands, East Timor, Ecuador, El Salvador, Marshall Islands, Micronesia, Palau, Panama, and Turks and Caicos.
B. MOST ACTIVELY TRADED CURRENCY PAIRS
| 2004 | 2007 | 2010 | 2013 | |
| EUR/USD | 28% | 27% | 28% | 24% |
| USD/JPY | 17% | 13% | 14% | 18% |
| GBP/USD | 14% | 12% | 9% | 9% |
| AUD/USD | 5% | 6% | 6% | 6^ |
| USD/CHF | 4% | 5% | 4% | 3% |
| USD/CAD | 4% | 4% | 5% | 7% |
* Bank of International Settlements 2013 Triennial FX Report
C. MOST ACTIVE TRADING HOURS
3:00AM ET / 7:00 GMT, London Open
8:30AM ET / 12:30 GMT, U.S. Economic Releases
D. CENTRAL BANK – FEDERAL RESERVE (FED)
Mandate: Price Stability and Maximum Employment
Created: 1913
Central Bank Chair: Janet Yellen (2014 – Present) succeeded Ben Bernanke (2006 – 2014)
E. GENERAL ECONOMIC STATISTICS
2014 GDP Estimate*: USD 17.46 Trillion
Population: 319 Million*
Interest Rate**: 0% – 0.25%
Inflation***: 0.2%
Trade Balance†: $41.9B Deficit
*CIA World Factbook (Sept 2015), **Federal Reserve Sep 2015, ***Bureau of Labor Statistics Aug 2015, †U.S. Bureau of Economic Analysis Sep 2015
F. MARKET-MOVING ECONOMIC RELEASES (IN ALPHABETICAL ORDER)
G. IMPORTANT CORRELATION
The Dow Jones Industrial Average (DJIA) is perhaps the most recognized trading-related name in the world, and the USD/JPY has been following it closely over the last few years.*
The Australian Dollar is the official currency for Australia. The AUD/USD is the fifth most actively traded currency pair by turnover, according to the Bank of International Settlement’s 2013 Triennial FX Report.
A. TRADING MECHANICS
Quote Convention: AUD
Symbol: $ or A$
Means: 1 AUD = 0.70 USD OR 1 USD = 1.42 AUD*
Value of a Pip for a 100k lot: USD 10
Currency Nicknames: Aussie, Wallaby
Fun Fact: Australia was the first country in the world to have a complete system of banknotes made from plastic instead of conventional paper or fiber.
*As of September 2015
B. MOST ACTIVE TRADING HOURS
7:00PM ET / 23:00 GMT, Tokyo Open
7:30PM ET / 23:30 GMT, AUD Economic Releases
8:30AM ET / 12:30 GMT, U.S. Economic Releases
C. KEY CURRENCY CROSSES
D. CENTRAL BANK – RESERVE BANK OF AUSTRALIA (RBA)
Mandate: Low and Stable Inflation (1 to 3% Target)
Created: 1959
Central Bank Governor: Glenn Stevens (2006 – Present) succeeded Ian Macfarlane (1996 – 2006)
E. GENERAL ECONOMIC STATISTICS
2014 GDP Estimate*: USD 1.1 Trillion
Population*: 22.7 Million
Interest Rate**: 2.00%
Inflation***: 1.5%
Trade Balance***: A$44 Million Deficit
*CIA World Factbook (Sep 2015)
** Reserve Bank of Australia Sep 2015
*** Australian Bureau of Statistics Sep 2015
F. MARKET-MOVING ECONOMIC RELEASES (IN ALPHABETICAL ORDER)
G. IMPORTANT CORRELATION
Many sources may cite the correlation of Gold with the AUD/USD, but Silver is actually more closely correlated.*
The Euro is the official currency of 19 states in the European Union, known collectively as the Eurozone. It is second only to the USD in terms of trading popularity with 33% of all trades involving it on one side, which is a decline from 39% in 2010.*
* Bank of International Settlements 2013 Triennial FX Report
A. MEMBERS OF THE EUROZONE * I
B. TRADING MECHANICS
Quote Convention: EUR
Symbol: €
Means: 1 EUR = USD 1.12 OR 1 USD = 0.89 EUR*
Value of a Pip for a 100k lot: USD 10
Currency Nicknames: Anti-Dollar, Fiber
Fun Fact: Euro banknotes increase in size in relation to their value. For instance, the €10 is larger than the €5, the €20 is larger than the €10, and so on up to the €500, which is the largest.
* As of September 2015
C. MOST ACTIVE TRADING HOURS
3:00AM ET / 7:00 GMT, London Open
4:00AM ET / 8:00 GMT, Economic Releases
8:30AM ET / 12:30 GMT, U.S. Economic Releases
D. KEY CURRENCY CROSSES
E. CENTRAL BANK – EUROPEAN CENTRAL BANK (ECB)
Mandate: Maintain Price Stability
Created: 1998
Central Bank President: Mario Draghi (2011 – Present) succeeded Jean-Claude Trichet (2003 – 2011)
F. GENERAL ECONOMIC STATISTICS
2014 GDP Estimate*: Eurozone Only — USD 13.40 Trillion European Union – USD 18.46 Trillion
Population*: Eurozone Only — 338 Million European Union – 508 Million
Interest Rate**: 0.05%
Inflation***: 0.2%
Trade Balance***: EUR 26.3 Billion Surplus
*World Bank, **ECB (Sep 2015), ***Eurostat (Sep 2015)
G. MARKET-MOVING ECONOMIC RELEASES (IN ALPHABETICAL ORDER)
H. IMPORTANT CORRELATION
Although the equity markets out of Germany (DAX) and France (CAC) are larger, the Spanish equity markets (IBEX) more closely match the movements of the EUR/USD.*
The British Pound is the official currency of the United Kingdom. Next to the U.S. dollar and the Euro, it is probably the most widely held reserve currency. London is also the biggest hub for FX trading with over 40% of global turnover.*
*Bank of International Settlements 2013 Triennial FX Report
A. TRADING MECHANICS
Quote Convention: GBP
Symbol: £
Means: 1 GBP = USD 1.54 OR 1 USD = 0.65 GBP*
Value of a Pip for a 100k lot: USD 10
Currency Nicknames: Sterling, Pound or Quid
Fun Fact: The British currency is the world’s oldest still in use, and is actually older than England itself. It was originated in the Kingdom of Mercia in the 8th century, a country that existed in what is now the center of England.
*As of September 2015
B. MOST ACTIVE TRADING HOURS
3:00AM ET / 7:00 GMT, London Open
4:30AM ET / 8:30 GMT, U.K. Economic Releases
8:30AM ET / 12:30 GMT, U.S. Economic Releases
C. KEY CURRENCY CROSSES
D. CENTRAL BANK – BANK OF ENGLAND (BOE)
Mandate: Price Stability; Keep Inflation below 2%
Created: 1694 BoE
Governor: Mark Carney (2013 – Present) succeeded Mervyn King (1998 – 2013)
E. GENERAL ECONOMIC STATISTICS
2014 GDP Estimate*: USD 2.43 Trillion
Population*: 63.7 Million
Interest Rate**: 0.5%
Inflation***: 0.1%
Trade Balance***: GBP 3.37 Billion Deficit
*CIA World Factbook, ** Bank of England Sep 2015, ***Office for National Statistics Sep 2015
F. MARKET-MOVING ECONOMIC RELEASES (IN ALPHABETICAL ORDER)
G. IMPORTANT CORRELATION
The UK economy and the EZ economy are intrinsically linked by region as well as EU membership.*
The Canadian Dollar is the official currency of Canada. The USD/CAD is the fifth most actively traded currency pair by turnover, according to the Bank of International Settlement’s 2013 Triennial FX Report.
A. TRADING MECHANICS
Quote Convention: CAD
Symbol: $ or C$
Means: 1 CAD = USD 0.76 OR 1 USD = 1.32 CAD*
Value of a Pip for a 100k lot: USD 7.57
Currency Nicknames: Loonie
Fun Fact: Back in 1987, the original design for the Canadian $1 coin was supposed to be a picture of a Native American and a Voyageur traveling in a canoe down a river, but the master die was lost (or stolen) in transit from the Ottawa Mint to the Winnipeg Mint and was never recovered. Fearing counterfeiting, the design was changed at the last second to the common loon, and the CAD has been called the Loonie ever since.
*As of September 2015
B. MOST ACTIVE TRADING HOURS
7:00AM ET / 11:00 GMT, CAD Economic Releases
8:30AM ET / 12:30 GMT, U.S. Economic Releases
C. KEY CURRENCY CROSSES
D. CENTRAL BANK – BANK OF CANADA (BOC)
Mandate: Price Stability; Keep Inflation below 2%
Created: 1934 BoC
Governor: Stephen Poloz (2013 – Present) succeeded Mark Carney (2008 – 2013)
E. GENERAL ECONOMIC STATISTICS
2014 GDP Estimate: USD 1.579 Trillion
Population*: 34.8 Million
Interest Rate**: 0.50%
Inflation**: 1.3%
Trade Balance***: CAD 0.6 Billion Deficit
*CIA World Factbook Sep 2015, ** Bank of Canada Sep 2015, *** Statistics Canada Sep 2015
F. MARKET-MOVING ECONOMIC RELEASE (IN ALPHABETICAL ORDER)
G. IMPORTANT CORRELATION
West Texas Intermediate (WTI) Crude Oil has been a reliable gauge for CAD strength over at least the last decade due to it being the US’s largest provider of the important resource.*
The Swiss Franc is the official currency of Switzerland. The USD/CHF is the sixth most actively traded currency pair by turnover, according to the Bank of International Settlement’s 2013 Triennial FX Report.
A. TRADING MECHANICS
Quote Convention: CHF
Symbol: ₣
Means: 1 CHF = 1.03 USD OR 1 USD = 0.97 CHF*
Value of a Pip for a 100k lot: USD 10.31
Currency Nicknames: Swissie (Swissy)
Fun Fact: The abbreviation of CHF for the Swiss franc is derived from the Latin name for Switzerland which is Confoederatio Helvetica.
*As of December 2014
B. MOST ACTIVE TRADING HOURS
3:00AM ET / 7:00 GMT, London Open
1:45AM ET / 4:45 GMT, Swiss Economic Releases
8:30AM ET / 12:30 GMT, U.S. Economic Releases
C. KEY CURRENCY CROSSES
D. CENTRAL BANK – SWISS NATIONAL BANK (SNB)
Mandate: Maintain Price Stability; Inflation Target of Less than 2%
Created: 1907
Chairman: Thomas Jordan (2012 – Present) succeeded Philipp Hildebrand (2010-2012)
E. GENERAL ECONOMIC STATISTICS
2014 GDP Estimate*: USD 444.7 Billion
Population*: 8.06 Million
Interest Rate**: -0.75%
Inflation***: -1.40%
Trade Balance***: CHF 3.74 Billion Surplus
*CIA World Factbook Sep 2015, ** Swiss National Bank Sep 2015, *** Swiss Federal Statistical Office Sep 2015
F. MARKET-MOVING ECONOMIC RELEASES (IN ALPHABETICAL ORDER)
G. IMPORTANT CORRELATION
EUR/USD is nearly the complete opposite of USD/CHF:*
IMPORTANT NOTE: Beginning in September 2011 the Swiss National Bank set a “floor” in the EUR/CHF at 1.20, essentially pledging to keep the currency pair above that level utilizing any means necessary. However, in January 2015, they unexpectedly abandoned the 1.20 floor resulting in some of the most excessive moves the currency markets have ever seen.
The Japanese Yen is the official currency for Japan. Next to the EUR/USD, the USD/JPY is the second most heavily traded currency pair in the forex market.*
*Bank of International Settlements 2013 Triennial FX Report
A. TRADING MECHANICS
Quote Convention: JPY
Symbol: ¥
Means: 1 JPY = USD 0. 0083 OR 1 USD = 120 JPY*
Value of a Pip for a 100k lot: USD 8.29
Currency Nicknames: Yen
Fun Fact: The 1 Yen coin is made of 100% aluminum and can float on water, completely nullifying the wishes of those who toss it in a well.
*As of September 2015
B. MOST ACTIVE TRADING HOURS
7:00PM ET / 23:00 GMT, Tokyo Open
7:30PM ET / 23:30 GMT, JPY Economic Releases
8:30AM ET / 12:30 GMT, U.S. Economic Releases
C. KEY CURRENCY CROSSES
D. CENTRAL BANK – BANK OF JAPAN (BOJ)
Mandate: Maintain Price and Financial System Stability
Created: 1882 BoJ
Governor: Haruhiko Kuroda (2013 – Present) succeeded Masaaki Shirakawa (2008 – 2013)
E. GENERAL ECONOMIC STATISTICS
2014 GDP Estimate*: USD 4.807 Trillion
Population*: 127.1 Million
Interest Rate**: 0% – 0.10%
Inflation***: 0.20%
Trade Balance†: JPY 268 Billion Deficit
*CIA World Factbook Sep 2015** BoJ Sep 2015, ***Japan Statistics Bureau July 2015, †Japan Ministry of Finance Sep 2015
F. MARKET-MOVING ECONOMIC RELEASE (IN ALPHABETICAL ORDER)
IMPORTANT CORRELATION: The Japanese Stock Market (NIKKEI) typically moves hand-in-hand with the USD/JPY.*
The New Zealand dollar is the official currency for New Zealand. It has the highest interest rate of the eight major currencies but actually has lower turnover than the Chinese Yuan and Mexican Peso, according to the Bank of International Settlement’s 2013 Triennial FX survey
A. TRADING MECHANICS
Quote Convention: NZD
Symbol: $ OR NZ$ Means: 1 NZD = USD 0.63 OR 1 USD = 1.59 NZD*
Value of a Pip for a 100k lot: USD 10
Currency Nickname: Kiwi
Fun Fact: New Zealand is the only country in the world with the right to put The Hobbit-related images on its currency.
*As of September 2015
B. MOST ACTIVE TRADING HOURS
7:00PM ET / 23:00 GMT, Tokyo Open
7:30PM ET / 23:30 GMT, NZD Economic Releases
8:30AM ET / 12:30 GMT, U.S. Economic Releases
C. KEY CURRENCY CROSSES
D. CENTRAL BANK – RESERVE BANK OF NEW ZEALAND (RBNZ)
Mandate: Maintain Stability and Efficiency of Financial System
Created: 1934 RBNZ
Governor: Graeme Wheeler (2012 – Present) succeeded Alan Bollard (2002 – 2012)
E. GENERAL ECONOMIC STATISTICS
2014 GDP Estimate*: USD 158.7 Billion
Population*: 4.4 Million
Interest Rate**: 2.75%
Inflation***: 0.4%
Trade Balance†: NZD 649 Million Deficit
*CIA World Factbook Sep 2015, **RBNZ Sep 2015, ***Statistics New Zealand Q3 2015, †Statistics New Zealand Sep 2015
F. MARKET-MOVING ECONOMIC RELEASE (IN ALPHABETICAL ORDER)
IMPORTANT CORRELATION
The Aussie and the Kiwi share a region, culture, and origin along with an economic similarity, hence the reason their currencies are so closely correlated.*
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