What is Negative Balance Protection?

Negative balance protection is offered by most of the forex and CFD brokers in Europe and the UK.

As an added protection, UK brokers are required to provide Negative Balance Protection and will credit your account to a zero balance if your account goes into negative. The requirement is introduced on an EU level, but it remains in force, along with the restrictions on leverage and other measures imposed by ESMA in 2018, even after the UK left the Union.

Negative balance protection means that you can't lose more money than what is on your trading account. Let's say you deposit €1.000 to your account and you enter a CFD trade with a 5:1 leverage. In this case, you will have a position worth €5.000. If there is market turbulence and your position suddenly drops 25%, you will suffer a €1250 loss, or 125% of your deposited money, due to the leverage. This means your €1.000 balance won't cover your losses and you would owe the broker €250 – if they didn't provide negative balance protection.

If you perform the same transaction at a broker that provides negative balance protection, your loss cannot exceed the deposited €1.000 amount.

If you perform the same transaction at a broker that doesn’t provide negative balance protection, you will not only lose your €1.000, but you have to pay an extra €250 to the broker.

Negative balance protection offers peace of mind and is definitely a nice to have feature when you choose a broker. 

Some brokers provide negative balance protection, some brokers don't. Among the brokers we reviewed, only ActivTrades provides Negative Balance Protection. Eightcap, Alchemy Markets and DeltaStock – don’t.

FOREX-U.S Jobless claims rose

The U.S dollar was mixed, rising against the euro, the Swiss Franc and the Australian dollar, steady versus the Japanese Yen and New Zealand dollars and falling against the sterling and the Canadian dollar. Jobless claims rose more than expected and existing home sales rose less but the median price of a home sold rose to a new all-time high. Treasury yields resumed their slide as coronavirus cases in the U.S rise 53% week over week with the Delta variant accounting for 83% of new cases. This variant has already prompted fresh restrictions in other parts of the world and the worry is that come fall, the same will happen in the U.S Canadian retail sales and U.K. PMIs are scheduled for release on Friday as well. Stronger numbers are expected as fewer restrictions bolster economic activity in both countries. The European Central Bank’s monetary policy announcement was the most important event this week but it did not inspire any breakout moves for EUR/USD. This of course is exactly what central bankers hoped for which is limited volatility when big announcements are made. For the ECB, their first major inflation change in two decades was announced earlier this month and today, the central bank made the change in forwarding guidance official. EUR/USD initially traded above 1.1830 but by the London close, it dropped below 1.1760 intraday. We talked about the possibility of EUR/USD rallying after the rate decision in yesterday’s note, but the distance that the ECB has put between themselves, and other central banks prevented a durable bounce. In yesterday’s meeting, the ECB confirmed that they are in no rush to raise interest rates. Not only did they avoid any taper talk, which is a sharp contrast to other central banks, they also amended their forward guidance to account for higher inflation tolerance. From July forward, the ECB expects to keep interest rates at their present or lower levels until inflation reaches 2% well ahead of their projection horizon, AND remain durably at or above that rate for the rest of the projection period. Although ECB President Lagarde said there were expectations for strong growth in the Eurozone economy in the third quarter, the outlook for inflation is subdued and the Delta coronavirus variant is a “growing source of uncertainty.” Between the change in forwarding guidance, Lagarde’s subdued inflation outlook and their concerns about the Delta variant, the ECB has made it very clear that they don’t share the Federal Reserve, Reserve Bank of New Zealand, Bank of Canada and Bank of England’s view that it may be time to start reducing asset purchases. Euro was the day’s worst performer and we expect the currency to remain under pressure.

Euro

The single currency fell as investors digested the European Central Bank statement and comment by its president. ECB President Christine Lagarde, in her media briefing, did not say anything to change the market's cautious outlook on the eurozone. She said a fresh wave of the coronavirus pandemic could pose a risk to the region's recovery. Overall, the EUR/USD traded with a low of 1.1823 and a high of 1.1880 before closing the day around 1.1877 in the New York session.

Yen

The Japanese Yen remained on the back foot after pulling back from multi-month highs amid a recovery in risk appetite as strong earnings lifted Wall Street stocks. The consensus is that the Delta strain does not pose an immediate risk to the recovery, delaying reopening by three months at the most as countries ramp up vaccination drives in response. Overall, the USD/JPY traded with a low of 109.71 and a high of 110.24 before closing the day around 110.10 in the U.S session.

British Pound

The British Pound erased its losses on the week against the dollar yesterday as recovering risk sentiment in global markets helped buoy currencies correlated with economic growth. Investor nerves over whether vaccinations will successfully head off future lockdowns amid surging coronavirus cases had led to a stock selloff earlier this week. Overall, the GBP/USD traded with a low of 1.3754 and a high of 1.3898 before closing the day at 1.3897 in the New York session.

Canadian Dollar

The Canadian Dollar was little changed against the greenback yesterday, with the currency holding on to gains over the last two days as oil rose and ahead of data that could offer clues on the domestic economy's strength coming out of lockdowns. Analysts expect retail sales data on Friday to show a 3% decline in May from April. Overall, USD/CAD traded with a low of 1.2440 and a high of 1.2554 before closing the day at 1.2441 in the New York session.

Australian Dollar

The Australian Dollar kicked off the trading session with downbeat economic data. The country’s services sector saw a contraction in growth for July, while manufacturing growth slowed, according to PMI data from IHS Markit. The services sector index fell to 44.2 from 56, and the manufacturing index fell to 56.8 from 58.6. Overall, AUD/USD traded with a low of 0.7408 and a high of 0.7485 before closing the day at 0.7421 in the New York session.

Euro-Yen

EUR/JPY is trading below 14, 50 and 100 days moving average. Fast stochastic is giving a bearish tone and MACD is also issuing a bearish stance. The Relative Strength Index is above 35 and lies below the neutral zone. In general, the pair has gained 0.63%.

Sterling-Yen

Currently, GBP/JPY is trading below 14 and above 50, 100 days moving average. Fast stochastic is issuing a bearish tone and MACD is also indicating a bearish stance. The Relative Strength Index is above 41 reading and lies below the neutral zone. On the whole, the pair has gained 1.15%.

Aussie-Yen

Currently, the cross is trading below 14, 50 and 100 days moving average. Fast stochastic is giving a bearish tone and MACD is also indicating a bearish stance. The Relative Strength Index is above 36 reading and lies below the neutral region. In general, the pair has gained 1.15%.

Euro-Sterling

This cross is currently trading below 14, 50 and 100 days moving average. Fast stochastic is indicating a bearish tone and MACD is issuing a bullish signal. The Relative Strength Index is above 44 and lies below the neutral region. Overall, the pair has lost 0.54%.

Sterling-Swiss

This cross is trading above 14 and below 50, 100 days moving average. Fast stochastic is issuing a bullish stance and MACD is also indicating a bullish tone. The Relative Strength Index is above 46 and lies below the neutral region. In general, the pair has gained 0.67%.

Disclaimer

This information has been prepared for information only and does not constitute an offer or commitment. This information does not constitute investment advice as defined by the rules of the FCA.

Daily technical analysis-The bulls completely dominated the market

 EUR/USD Current level - 1.1778

The downward movement was once again limited by the support level at 1.1760 and the currency pair continues to trade within the narrow range between 1.1760 - 1.1800. At the time of writing, the market has no clear direction and the bulls might try to take the pair towards 1.1850. Only a breach of the critical support at 1.1760 may lead to further sell-offs, heading the EUR/USD towards the next support at 1.1717.

USD/JPY Current level -  110.11

At the time of writing this analysis, the currency pair is found in the consolidation phase and the expectations are for a new test of the resistance at 110.30. In case this resistance is breached and the bulls enter the market, then it is possible for the pair to head towards 110.60 - 111.10. In the negative direction, the first support is located at 109.70.

GBP/USD Current level - 1.3774

The sterling continues to appreciate against the U.S. dollar and is currently headed towards a test of the resistance at 1.3800. If this level is breached, it is possible for the pair to test the next resistance at 1.3860. If the bears prevail and the resistance at 1.3800 is not breached, then the pair is expected to test the support at 1.3665.

DAX30 Current level - 15564

During the last trading sessions, the German index recovered its recent losses and gained more than 400 points. The bulls completely dominated the market and, if they don't lose their momentum, the index will most likely breach the resistance at 15586 and head towards the next resistance level of 15698. In the downward direction, the first important support is found at 15464.

US30 Current level -  34884

In the last trading sessions, volatility was high and we witnessed a strong rebound from the support at 33747, which gave the bulls complete control over the market and the US30 rose above the resistance at 34695. At the time of writing, the expectations are for a move towards the resistance at 35030. Before attacking the aforementioned level, however, a slight corrective move towards the support at 34695 is a possible scenario.

Disclaimer

This information has been prepared for information only and does not constitute an offer or commitment. This information does not constitute investment advice as defined by the rules of the FCA.

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Daily technical analysis-Ongoing fears of new lockdowns across Europe

EUR/USD Current level - 1.1794

The depreciation of the common European currency against the dollar came to a halt slightly below the support zone of 1.1773 and, at the time of writing the analysis, the pair is headed towards a test of the resistance level of 1.1805. The short-term forecast is for the pair to enter into a consolidation phase within the range between 1.1773-1.1849 before either the buyers or the sellers take control. A spike in volatility is expected around the announcement of the European Central Bank interest rate decision (11:45 GMT) and during the press conference following the announcement (12:30 GMT).

USD/JPY Current level -  110.14

During yesterday's trading session, the dollar managed to partially recover against the yen, but the test of the resistance level of 110.30 was unsuccessful and the short-term expectations are for the pair to trade in a consolidation phase above the support level of 109.72. The main resistance level remains the aforementioned level of 110.30.

GBP/USD Current level - 1.3703

The pound found support at the level of 1.3570 and stopped depreciating against the dollar. At the time of writing, the pair is found in a corrective phase, which is expected to be limited by the resistance level of 1.3800. The most likely scenario, after the corrective phase ends, is for the pair to retest the support level of 1.3570.

DAX Current level - 15464

The German index continues to recover after the huge sell-off at the start of the week. Yesterday, the DAX30 breached the resistance level of 15358 and, at the time of writing, is headed towards a test of the resistance level of 15464. The expectations are for the index to continue recovering, but considering the ongoing fears of new lockdowns across Europe spurred by the new "Delta” variant of the virus, new sell-offs, as well as increased volatility, are possible.

US30 Current level -  34839

The U.S. blue-chip index is headed towards a test of the resistance level of 34846 and, if the test proves to be successful, it is possible that the psychological level of 35000 will be reached. Similar to the German index, the US30 could face strong sell-offs because of the fears stemming from the new "Delta” variant of COVID-19. During today's trading session, investors' attention will be focused on the initial jobless claims data (12:30 GMT).

Disclaimer

This information has been prepared for information only and does not constitute an offer or commitment. This information does not constitute investment advice as defined by the rules of the FCA.

U.S Stock Market-Wall Street's main indexes fell

Wall Street's main indexes fell on Friday, with growth and value stocks falling as investors turned risk-averse towards the end of the week, while gains in defensive parts of the market kept declines at bay. Markets have largely cheered a steady recovery in the labor market this year, but concerns about higher inflation due to a faster-than-expected rebound have hurt sentiment, with investors oscillating between "value" and tech-heavy "growth" names in the past few sessions. Economy-sensitive S&P 500 energy, financials and industrials led declines among the 11 major sector indexes by afternoon trading. The energy sector is down over 6% so far for the week. Technology stocks also fell on Friday, while defensive utilities, consumer staples and real estate gained. Real estate also hit a record. Investors are more concerned right now about missing the upside of this market than they are about a sell-off. In the near term, all they're really doing is shifting between stocks and not taking money out of the overall market.

Dow Jones Industrial Average

The Dow Jones Industrial Average lost 0.86%. The biggest gainers of the session on the Dow Jones Industrial Average were Procter & Gamble Company, which rose 0.98% or 1.37 points to trade at 140.53 at the close. The Travelers Companies Inc. added 0.52% or 0.81 points to end at 156.39 and Amgen Inc. was up 0.51% or 1.27 points to 247.90 in late trade. The biggest losers included Dow Inc., which lost 3.09% or 1.91 points to trade at 60.00 in late trade. Chevron Corp declined 2.65% or 2.68 points to end at 98.62 and Walt Disney Company shed 2.64% or 4.87 points to 179.28.

NASDAQ 100

 The NASDAQ index declined 0.80%. The top performers on the NASDAQ Composite were Red Cat Holdings Inc. which rose 41.35% to 7.110, China SXT Pharmaceuticals Inc. which was up 39.33% to settle at 2.0900 and GX Acquisition Corp which gained 26.93% to close at 10.18. The worst performers were Bit Brother Ltd which was down 48.00% to 1.0400 in late trade, FibroGen Inc. which lost 42.27% to settle at 14.34 and American Outdoor Brands Inc. which was down 21.93% to 28.05 at the close.

Oil

Oil prices recouped some losses today but were still down after OPEC+ overcame internal divisions and agreed to boost output, which sparked concerns about a crude surplus as COVID-19 infections continue to rise in many countries. U.S oil was down 66 cents, or 0.9%, at $71.15 a barrel, having slipped to $70.64 earlier. OPEC+ ministers agreed on Sunday to increase oil supply from August to cool prices that earlier this month climbed to the highest in around 2-1/2 years as the global economy recovers from the COVID-19 pandemic. The group, which includes members of the OPEC and allies such as Russia, agreed on new production shares from May 2022. Oil prices may continue to gyrate in the coming weeks. The group last year cut output by a record 10 million barrels per day (BPD) amid evaporation in demand the pandemic developed, prompting a collapse in prices with U.S oil at one point falling into negative territory. It has gradually brought back some supply, leaving it with a reduction of around 5.8 million BPD.

Precious and Base Metals

Gold prices edged higher today, lifted by a retreat in U.S. Treasury yields and concerns that a surge in coronavirus cases could dampen global economic recovery, though an uptick in the dollar limited the safe-haven metal’s appeal. Spot gold was up 0.1% at $1,812.06 per ounce, after falling 1% in the previous session. U.S gold futures were steady at $1,815.10. Covid-driven risk aversion is driving Asian markets today after a weak finish on Wall Street on Friday. Gold is used as a safe investment during times of political and financial uncertainty. Some short-covering is providing modest support to gold, but it not displaying any clear momentum in either direction. Sentiment in wider financial markets remained weak as investor risk appetite was soured by growing inflationary pressures and a relentless surge in coronavirus cases. Many countries, particularly in Asia, are struggling to curb the highly contagious Delta variant of the coronavirus and have been forced into taking lockdown measures. Benchmark 10-year Treasury yields held near more than one-week low, reducing the opportunity cost of holding non-interest-bearing gold. However, safe-haven gains for the U.S dollar limited gold’s appeal, as the dollar index strengthened 0.1% and edged towards a three-month high against its rivals. Negative real yields appear to be driving gold prices in the face of a stronger USD. We expect the U.S. dollar to weaken as other central banks hike rates. On the technical front, spot gold may break a support at $1,813 per ounce and fall towards $1,789, following its failure to break a resistance at $1,833. Elsewhere, silver fell 0.7% to $25.49 per ounce, palladium rose 0.4% to $2,641.68, and platinum eased 0.1% to $1,101.15. Copper prices fell today as the dollar hovered near its highest levels in months, making greenback-priced metals more expensive and less appealing to holders of other currencies

Traditional Agricultures

Wheat futures rose as much as 2% today to hit a two-month high, as adverse weather in several major exporters stoked concerns about global supplies. Corn also climbed up to 2%, drawing support from the hot, dry weather in the United States, while soybeans firmed 1.5%.

Disclaimer

This information has been prepared for information only and does not constitute an offer or commitment. This information does not constitute investment advice as defined by the rules of the FCA.