GIO4X Labs · Experiment

Forces

Four models of what moves a market, made physical. Each is the textbook tendency, other things being equal, and says so: none is a forecast.

The tug of war

A pair is always a contest of two.

Put weights on either currency and watch which way the rope goes.

Currency pair, defined

The base currency has the stronger pull: the textbook tendency is for the pair to rise.

The usual tendency, other things being equal. Markets weigh expectations as well as facts, and often move the other way.

The lever room

One lever, a long chain.

Raise or cut the policy rate and follow the textbook chain to the currency.

Central Bank Watch

Policy rate: raised
Borrowing costs: rise
Spending: slows
Inflation: eases, later
Currency: tends to firm

The textbook chain. Each link takes time, the later ones many months, and a currency often moves on what was expected rather than on the decision itself.

The shockwave

A release lands. Who feels it first?

Drop a scheduled release into the pond and see what the ripple reaches, and in what order.

Economic events

A US rate decision: felt first by us dollar pairs, then by gold and us indices, and more faintly by other currencies and crypto.

A general reading of how directly each market is tied to the release. It is not a measurement, and it says nothing about direction or size.

The liquidity tide

High water, narrow spreads.

Twenty-four hours in a harbour: the water is how many FX windows are open.

World Market Clock

Hour of the day: 14:00 UTC

At 14:00 UTC, 2 of the four FX windows are open. High water: the fullest hours, when spreads on the major pairs are usually narrowest.

The windows are the conventional ones, shifted by each city’s offset today. “Usually” is a tendency: a release can widen spreads at high water too.

Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose.

Continue

Fetching the page