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Why Africa is now the biggest new market for forex trading

  
  Analysis
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Forex trading is on the rise in Africa

FX
In recent years there has been a significant rise in demand for forex trading in Africa, with the majority of the estimated 1.3 million traders in Africa residing in South Africa and Nigeria.

Not only is the number of traders and investors across Africa increasing, but the number of foreign investors is also on the rise, strengthening Africa’s currencies as well as the economy greatly.

With the South African Rand being one of the top 20 most traded currencies in the world at the moment, Africa offers one of the largest markets for forex trading globally.

Some of the world’s largest forex brokers, such as FXTM and HotForex, have become regulated with the Financial Sector Conduct Authority (FSCA) of South Africa, one of the most respected financial authorities in the industry.

With the increase in forex trading in Africa, the FSCA has responded responsibly and enforced a new licensing regime known as the Over the Counter Derivative Provider license (ODP).

The ODP forces all brokers with a local presence to provide transaction data such as price, instrument type, leverage ratios as well as the name and residence of the investor, to the FSCA to ensure safe and legal trading practices.

The FSCA allows these brokers to offer services not only in South Africa, but also to other African countries such as Nigeria, Ghana and Kenya.

The European Securities and Markets Authority (ESMA) enforced new restriction laws on the maximum leverage ratios allowed for European traders, forcing traders to look to other markets.

These new restrictions only allow leverage ratios of 30:1 for major currency pairs, 20:1 for non-major currency pairs and gold, and 2:1 for cryptocurrencies. Leverage ratios as low as these have a massive negative impact on potential profits.

Added to this, the provision of bonuses, promotions and binary options was also banned.

The FSCA allows brokers to offer unlimited leverage ratios, which can potentially maximise funds greatly, and has led to more residents being prompted to start trading the African markets.

Although there are minor restrictions in some African countries to prevent fraudulent activities, there is no complete forex trading ban in Africa, which allows nearly anyone to profit from these ever-growing markets.

Recent lockdown measures as a result of the COVID-19 pandemic and the resulting unemployment have prompted people to explore new opportunities to earn money.

The forex market is easily accessible, holds endless opportunities to make money with little required capital and traded 24 hours, five days a week, allowing people to trade either full-time or part-time.

Where forex trading was always expensive and originally done by large companies and high net-worth investors, it is now more affordable than ever, with some brokers charging no minimum deposits and minimal banking fees.

Another incentive to enter the world of forex trading is the multitude of free tools to ensure success, such as trading courses, demo accounts and webinars that educate beginners on how to trade, use strategies and analyse markets.

Trading is made easy with the internet becoming more accessible across the African continent. All one needs is a smart phone, pc, laptop or tablet, and a good internet connection, to trade from anywhere in Africa and the rest of the world.

US 5 year yield falls below the 0.20% to a new low record

  
  Analysis
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Gold and so are off low levels

the US 5 yield has fallen below the 0.20% level to a low yield of 0.1949%. That is a new all time low.  The high yield today reached 0.2232%.

Gold and so are off low levels_

The fall yield has helped to send gold back up toward unchanged and trades above and below the unchanged level. Silver is also higher.
Technically, the 5 year yield has been moving steadily to the downside since last Wednesday. On that day, the price tested its 200 hour moving average (green line in the chart above). The low yield on Friday reached 0.2044% and bounced. Today, the move to the down side has resumed.
The 10 year yield is also lower on the day but remains still above its March 9 all-time low yield level of 0.3137%. The yield is currently at 0.5118%

Bond’s send out a distress signal

  
  Analysis
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All is not well-

The constant fall in Bond yields is sending out a signal that all is not well in the world. The tail end of last week may have seen some excellent earnings from facebook, apple, amazon and alphabet and that started a fresh equity rally early Friday. However, the fall of Bond yields is saying, ‘look out! There may be trouble ahead. For the uninitiated bond traders tend to take a more long tern macro view. So, when equities rise, but bond yields are falling that is a signal something is wrong.

If you can recall at the start of the year one of the big questions was which market is right? Falling and yields or rising equities? The answer has been, ‘the falling bond yield market’. So, the general rule of thumb is go with the bond yield market. Now, of course this doesn’t mean that a funny divergence can last for weeks and months. However, at the very least it is a warning sign. That warning sign is showing again.

All is not well- 

Yields are dropping

The 10Y Gilt yield (UK bond) hit a record low last week. The 10Y Bund (German bond) closed at its lowest level since mid-May on Thursday last week, while the 10 y UST (US bond) was down towards its lowest ever close last week too.

Bonds

SP500

Why are they dropping?

The proverbial tea leaves are being read and a second wave of COVID-19 is being seen ahead. This will mean more monetary and fiscal policy help to get through the pandemic.So, yes the equity market has been rallying on the central bank support. However, the bond market is saying that the next stage of the global economy is fraught with dangers and a ‘V’ shaped recovery is more hope than reality.

German Minister of State for Europe Roth says there will be “no business as usual” between EU & China

  
  Analysis
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Michael Roth, German Minister of State for Europe in an pinion article in German news magazine Der Spiegel

  • will be “no business as usual” between the European Union and China following the assertive political moves on Hong Kong
  • urged fellow EU nations not to “be afraid to lock horns” with Beijing.
    referred to China by its autocratic political structure, casting it as a systemic rival that has “unfortunately” challenged Europe’s “foundation of values”
Via South China Morning Post, link here for more (may be gated).
china Germany

Trump floats the idea of delaying the US election

  
  Analysis
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That’s a big change

For all the people who were worried about Trump calling off the election, this is some hard evidence.
With Universal Mail-In Voting (not Absentee Voting, which is good), 2020 will be the most INACCURATE & FRAUDULENT Election in history. It will be a great embarrassment to the USA. Delay the Election until people can properly, securely and safely vote???
I’m not a constitutional expert but I believe the November 3 election date is locked in with virtually no flexibility. But he sure is laying the groundwork for questioning the results or refusing to leave if he loses.
The market can ignore a lot of talk from Trump but there’s a limit and this is getting closer to it.

Goldman Sachs says real concerns about USD as reserve currency. Barclays says No.

  
Analysis, Forex
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GS is alarmed, says “Real concerns about the future of the US Dollar as the world’s reserve currency have started to emerge.”

Barclays says nope, the US “isn’t anywhere close to losing its reserve currency status”. Barclays cite:
  • “depth of capital markets and overwhelming volume of USD denominated global transactions” 

On the recent decline in the dollar:

  • “Reserve managers and investors have spent the better part of the last few years accumulating USD assets and with the recent developments, simply find it prudent to diversify into less USD denominated exposures” 

Barclays comments via Bloomberg.

I’m with Barclays on this one.
GS is alarmed, says "Real concerns about the future of the US Dollar as the world'sreserve currency have started to emerge."

Not a good look as USD/JPY nears 100 pip loss

  
Analysis, Forex
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USD/JPY wilts even as risk trades rise

The old correlation between the S&P 500 and USD/JPY is dead. Stocks have climbed in the past 20 minutes and the pair is at the lows of the day.
More importantly, the technical pictures is melting as the pair falls below the May low once again. It would take a miracle turnaround to finish back above 106.00 today. With the break lower, there isn’t much to halt a decline to the 2020 lows.
USD/JPY wilts even as risk trades rise

The euro is off and running. Levels to watch

  
Analysis, Forex
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EUR/USD up 92 pips today

The euro cracked 1.17 in Asia and has continued to run higher, hitting 1.1764 as New York arrived before pulling back to 1.1747 at the moment. Today’s durable goods orders report hasn’t been a factor.
The impetus for the seven-day run in the euro was a successful European recovery fund negotiation. At the same time, the US is struggling with COVID-19 and European economies are closer to normalcy with virus counts low (although some hotspots are appearing).
Overbought indicators are obviously flashing warning signs for the euro but there is still a lot to like. 1.17 isn’t particularly high and assets in Europe are still relatively cheap. Carry is dead almost everywhere so that’s not going to be a big drag.
I’ll keep it simple on the technicals and highlight the June and Sept 2018 highs at 1.1852 and 1.1815 as resistance. I like the euro against the US dollar but the risk-reward at the moment is mediocre.
EUR/USD up 92 pips today

Japan PM Abe: Current situation does not call for state of emergency declaration

  
  Analysis
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Comments by Japanese prime minister, Shinzo Abe

  • Coronavirus cases are rising, government is watching closely
It is clear that the virus situation across the country is not getting any better as the curve is steepening as the days go by. Japan reported a single day record of 980 new virus cases yesterday, with infections also picking up outside of Tokyo.
Japan
Osaka is reported to find 149 new cases today and that would be the daily record for the prefecture, with Tokyo having found another 260 new cases as reported earlier.
As much as the government insists that things are “under control”, you have to wonder where will they draw the line and say that they have made a mess of the situation.
Eventually, the fear of the virus spread in itself will take a toll on the economy – as much as the government wants to keep business activity running for as long as they can afford to. Unfortunately, that comes at the costs of people’s health and well being, and at worst lives.
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