Mason Dean Capital FOREX Blog

Mason Dean Capital FOREX Blog

How far can the Dollar fall?

How far can the Dollar fall?

The US dollar

The US dollar is on the back foot, with EUR/USD touching 108 and USD/JPY breaking support.

Here is their view, courtesy of eFXnews:

President Trump’s travel ban – and his associated decision to fire the acting Attorney General – dominates sentiment and remains good for Treasuries, the yen (and gold), but bad for bonds and the dollar. How long will market sentiment to be affected? How far can the dollar and yields fall on this?

I’m not sure serious analysis is possible, and I don’t trust my gut instincts on something as far from the usual state of affairs, but my bias is still that we’ll get back to the Trump economic program, and the implications for Fed policy, before too long. More prosaically, markets will focus on the US jobs data due Friday.

So how to trade?

We still want to fade this bout of Yen weakness too, with the BoJ holding policy and still anchoring yields. This till leaves me looking fondly at long EUR/JPY as an idea, even if we still think it is 2 1/2 months too early for that trade really.

Courtesy of ForexCrunch.com

Dealing Desk Vs. Non Dealing Desk

 Dealing Desk Vs. Non Dealing Desk

 

 Dealing Desk Vs. Non Dealing Desk is always an ongoing debate in the FOREX world.

There are many misconceptions that are derived from this conversation for which we will address in this article. First of all, lets outline the definitions


Dealing Desk (Market Makers)

Dealing Desks (Market Makers) have the following characteristics:

- The spreads are fixed

- Orders are filled on a discretionary basis

- The trade is filled by the broker taking the opposite side of the trade

Non Dealing Desk  

Non Dealing Desks are split between Straight through Processing and ECN (Electronic Communication Network).

STP - Straight Thru Processing

STP - Straight Thru Processing include the following characteristics:

- Variable spreads

- connects client and LP (Liquidity Provider)

- Quote are from LP

ECN

ECN = Electronic Communication Network and is a computer network that disseminates orders entered by market makers to third parties and permits the orders to be executed against in whole or in part. The most popular product traded through ECNs are stocks and FOREX

ECN provide:

Variable spreads or commission fees

A bridge between client and LP as well as other traders

Price quotes derived from LPs and other ECN Members

Depth of market available

Misconceptions

Misconceptions include:

(1) ECNs are STP

ECN is different than STP as Straight Thru Processing (STP) brokers simply place your trade order to the next counterparty which can be all of the three types of brokers: ECN, Market Maker or again STP.

 

(2) FOREX Brokers are out to get the client by stop hunting and that client losses go right into the broker's bank account. This is the LARGEST misperception. The market maker broker (For instance Gain Capital) takes all its clients positions and form a large single net position which is then taken in or out of the pocket or hedged with other counterparty.

 

It is the recommendations of Mason Dean Capital to use a market maker such as Gain Capital for all retail FOREX trading.

 

 

 

 

 

 

The Trump Effect

The Trump Effect

Now that the election is over and Trump will be president in 15 days, we can focus on the implications of a Trump presidency. Donald Trump aims to shake up the US political establishment, which could potentially have a large effect on market volatility.

During 2017, the key economic policies set forth by Trump will have an impact on various key financial markets such as US Dollar, Euro, Yen, Pound and other important currencies as well as stocks, commodities and bond markets in the event of victory.

 

Dollar Effect

"Trump has repeatedly stated in public his position that the US Federal Reserve and Fed Chair Janet Yellen have been politically-motivated in keeping interest rates low. He has essentially accused the Fed of attempting to create false appearances of a healthy economy and stock market to embellish the Obama Administration. Trump has deemed the rising US equity markets as a “false stock market” that has been propped up by an overly accommodative Fed. This stance against what he sees as politically-driven dovishness provides a hint that if Trump gains the highest office in the land, he may be keen on instituting a more hawkish Fed. In that scenario, the possibility of higher interest rates going forward could lead to a stronger US dollar. In addition, Trump’s rhetoric on international trade issues has deemed his policy position as heavily protectionist. At least initially, this stance could lead to a further boost for the USD, especially against emerging market currencies like the Mexican peso and Chinese yuan." by James Chen