How Successful Forex Traders Use Risk-to-Reward Ratios to Maximize Profit

Economic

Summary:

Discover how top forex traders leverage risk-to-reward ratios to make smarter trades, minimize losses, and maximize profits. Learn key strategies and practical tips for trading success.

In the world of forex trading, one of the most crucial factors that separates successful traders from beginners is the ability to manage risk effectively. While it may sound counterintuitive, making consistent profits in the forex market isn’t just about maximizing gains—it’s equally about controlling and minimizing losses. This is where the risk-to-reward ratio (R/R ratio) comes into play. Top forex traders use this powerful tool to assess trade opportunities, set realistic profit targets, and ensure that their potential reward justifies the risk they’re taking. In this article, we will explore how successful forex traders use risk-to-reward ratios to maximize their profits and avoid unnecessary losses.

What is a Risk-to-Reward Ratio?

The risk-to-reward ratio is a simple concept in trading that measures the potential loss of a trade against the potential gain. In essence, it helps traders evaluate whether the amount they stand to lose on a trade is worth the amount they stand to gain. The formula is:

Risk-to-Reward Ratio=Potential Loss/Potential Profit

For example, if a trader sets a stop-loss order at 50 pips (a unit of price movement in forex) and aims for a profit of 150 pips, the risk-to-reward ratio is 1:3. This means that for every 1 pip risked, the trader stands to gain 3 pips.

Why Successful Forex Traders Focus on Risk-to-Reward Ratios

Minimizing Losses while Maximizing Gains

Forex trading is inherently risky. Markets are volatile, and no trader wins 100% of the time. However, the key to long-term profitability lies in managing losses effectively. Traders who use a favorable risk-to-reward ratio (e.g., 1:3 or 1:4) can withstand a higher percentage of losing trades because the profits from winning trades will offset the losses from losing trades.

For instance, a trader with a 1:3 risk-to-reward ratio could afford to lose three trades in a row and still break even if the fourth trade is a winner. Over time, this strategy ensures that the trader’s wins outweigh the losses, even if they have more losing trades than winning ones.

Enhancing Decision-Making

The R/R ratio forces traders to think critically about every trade they make. When a trader sets an entry point, stop-loss, and take-profit level based on a 1:3 risk-to-reward ratio, it encourages them to wait for high-quality setups that offer better rewards for the risk taken. This discipline prevents traders from taking impulsive, high-risk trades with poor reward potential.

Avoiding Overtrading

Successful traders are not always looking for opportunities to trade; they’re looking for high-quality opportunities. By using a calculated risk-to-reward ratio, traders can filter out low-probability trades. A good risk-to-reward ratio keeps traders from entering the market out of boredom or greed. It encourages them to wait for setups that have a higher probability of success.

How to Calculate and Use the Risk-to-Reward Ratio in Forex Trading

Determine Your Stop-Loss and Take-Profit Levels

Before entering any trade, determine where you will set your stop-loss (the point where you will exit the trade if the market moves against you) and your take-profit (the level where you will exit the trade if the market moves in your favor). The difference between the entry price and the stop-loss determines your potential loss (risk), while the difference between the entry price and the take-profit level gives you the potential profit (reward).

Choose an Appropriate Risk-to-Reward Ratio

Successful forex traders typically aim for a minimum risk-to-reward ratio of 1:2 or 1:3. This means that for every dollar (or pip) they risk, they want to make at least two or three dollars (or pips) in profit. For example, if you risk 50 pips, aim for a target profit of 100 to 150 pips.

Evaluate Each Trade

It’s essential to evaluate whether a trade setup has a favorable risk-to-reward ratio before entering. If the potential reward does not outweigh the potential risk, it’s better to skip the trade. Sometimes, you may need to adjust your entry or exit levels to improve the risk-to-reward ratio.

Maintain Consistency in Risk Management

Professional traders maintain consistency in how they apply the risk-to-reward ratio. They don’t deviate from their strategy, even after a few consecutive losses or wins. By sticking to a disciplined approach, traders protect their capital while allowing their profits to accumulate over time.

Practical Example: Using the Risk-to-Reward Ratio

Let’s say you have a trading account with $10,000, and you decide to risk 1% of your account on each trade. This means your risk per trade is $100. If your stop-loss is set to 50 pips, and the value of each pip is $10, you are risking $100. Now, if you aim for a reward of 150 pips, the potential profit would be $150 (since each pip is worth $10).

In this case, your risk-to-reward ratio would be:

Risk-to-Reward Ratio=100/150=1:3

This means you are risking $100 to potentially make $150 on the trade, giving you a favorable risk-to-reward ratio of 1:3.

Conclusion

The risk-to-reward ratio is a fundamental tool used by successful forex traders to maximize profits while minimizing losses. By adhering to a disciplined risk management strategy, traders can ensure that even if they experience a string of losses, their overall profitability remains intact. By focusing on high-quality trades with favorable risk-to-reward ratios, traders improve their chances of long-term success in the forex market. Remember, the key to profitable forex trading lies not just in the number of winning trades, but in how well you manage your risks and rewards.

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Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

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Glendon

Economic

Successful trading requires more than just good instincts and a basic understanding of the market. It requires adaptability, the ability to evolve with changing market conditions, and, most importantly, the willingness to reassess your approach when things aren’t going as planned. One of the most difficult yet crucial parts of being a trader is recognizing when it’s time to change your trading strategy. Markets are dynamic, and a strategy that worked well in the past may no longer be effective under new conditions.

If you're finding yourself facing consistent losses or stagnating results, it may be time to re-evaluate your current strategy. Here are five signs that indicate it’s time to change your trading strategy:

1. You Are Experiencing Consistent Losses

The most obvious sign that your trading strategy might need an overhaul is when you are consistently losing trades. While occasional losses are normal, a sustained period of losing trades suggests that something isn’t working. Traders often make the mistake of sticking with a strategy simply because they’ve invested time and effort into it. However, if your trades are consistently falling short of expectations, it's a signal that your strategy needs to be adjusted or replaced.

What to Do:

1. Take a step back and analyze your trading history.

2. Are your losses due to poor decision-making, market shifts, or strategy misalignment?

3. Consider backtesting different strategies and refine your approach accordingly.

2. Your Strategy Is No Longer Aligned with Market Conditions

Markets are always changing—what worked during a bull market may not work in a bear market, and vice versa. Similarly, a strategy that was effective during periods of high volatility may not perform as well in quieter market conditions. If your strategy isn’t producing the desired results, it might be because it is no longer aligned with the current market environment.

What to Do:

1. Monitor market trends, volatility, and economic news that could affect your trading strategy.

2. Adapt your strategy to suit the prevailing conditions. For instance, if you were trading trends during volatile conditions, consider switching to a range-based strategy during more stable times.

3. You Are Not Following Your Own Rules

Another sign that it’s time to change your strategy is when you find yourself disregarding the rules you’ve set for yourself. Many successful traders develop a set of strict rules and guidelines for entering and exiting trades, risk management, and position sizing. However, when frustration or greed sets in, traders may start to ignore these rules, leading to impulsive and unstructured decisions. If you’re not adhering to your trading plan, it may be time to reconsider whether that plan is still relevant or if it needs to be redefined.

What to Do:

1. Reflect on your strategy and whether it still makes sense in the current market context.

2. Adjust your risk management rules, entry, and exit strategies to ensure that they align with your goals and prevent impulsive decisions.

3. Consider automating your strategy if you are prone to emotional decisions.

4. You’re Not Learning from Your Mistakes

Trading is a learning process, and every mistake is an opportunity to improve. However, if you find yourself repeating the same mistakes without making adjustments, it’s a sign that your strategy may need to be overhauled. Whether it's poor risk management, entering trades based on unreliable signals, or not cutting losses in time, failing to learn from past errors can lead to more significant setbacks.

What to Do:

1. Conduct a thorough review of your past trades and identify patterns in your mistakes.

2. Ask yourself: Why did this trade fail? What can I do to avoid making the same mistake?

3. Consider adjusting your trading strategy to minimize those common pitfalls, such as improving stop-loss management or diversifying your entry signals.

5. You Are No Longer Achieving Your Financial Goals

Every trader enters the market with specific financial goals in mind—whether that’s consistent monthly profits, growth in capital, or gaining a particular level of experience. If you’re no longer meeting these goals, or if your financial progress has stagnated, it’s a clear indication that your strategy may need to be reassessed. Trading should be a means to achieve your financial objectives, and if that’s not happening, it’s time to take a closer look at your approach.

What to Do:

1. Reevaluate your financial goals and determine if your current strategy is still suitable.

2. Break down your goals into actionable steps and adjust your strategy to ensure you're working towards them effectively.

3. Set realistic profit targets and timeframes to help stay on track.

How to Effectively Change Your Trading Strategy

Recognizing when your trading strategy needs to change is only half the battle. The next step is to make an effective transition to a new strategy or tweak your existing one. Here are some practical steps to follow:

Conduct a Self-Assessment

Evaluate your past trades, emotional responses, and performance metrics. Identify recurring patterns of mistakes and areas for improvement.

Test New Strategies

Don’t make wholesale changes without testing new strategies first. Backtest them and use demo accounts to evaluate their effectiveness in different market conditions.

Seek Advice from Other Traders

Joining online trading communities or seeking advice from mentors can provide fresh perspectives and help you refine your strategy.

Adapt to Changing Markets

Continuously monitor the market and be open to adjusting your strategy as needed. Whether it's a change in volatility, trends, or other factors, your strategy should evolve alongside the market.

Maintain Patience and Discipline

Changing strategies doesn’t mean you’ll see immediate results. Be patient and stay disciplined while implementing your new or revised approach.

Conclusion

Trading is a constantly evolving skill, and to stay successful, you must be willing to adapt. If you’re experiencing consistent losses, not following your rules, or failing to meet your goals, it might be time to reassess your trading strategy. Recognizing the signs that indicate the need for a change is the first step toward becoming a more adaptive and successful trader. By staying flexible and continuously refining your strategy, you’ll increase your chances of long-term profitability and success in the dynamic world of trading.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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Glendon

Economic

When it comes to understanding the UK stock market, two key indices often come up in conversation: the FTSE 100 and the FTSE 250. Both indices are critical benchmarks for investors, reflecting the performance of the UK’s largest and most influential companies. However, despite their similarities, these indices differ significantly in terms of their composition, performance, and the role they play in an investor’s portfolio.

In this article, we’ll explore the differences between the FTSE 100 and FTSE 250, providing a detailed comparison to help you understand their unique characteristics, how they are constructed, and what their respective roles are in the wider market.

What is the FTSE 100?

The FTSE 100 (Financial Times Stock Exchange 100 Index) represents the 100 largest companies listed on the London Stock Exchange (LSE) by market capitalization. These companies are typically multinational corporations that dominate the UK economy. Many of them have global operations, with a significant portion of their revenues coming from outside the UK.

The FTSE 100 is often seen as a reflection of the broader health of the UK economy. It includes well-known companies across a variety of sectors, such as energy (BP, Royal Dutch Shell), consumer goods (Unilever, Diageo), and finance (HSBC, Barclays). These firms tend to have a high degree of international exposure, which means the performance of the FTSE 100 can often be influenced by global factors, such as foreign exchange rates, geopolitical events, and international trade.

Key Features of the FTSE 100:

Market Capitalization: Composed of the largest 100 companies by market cap on the LSE.

Global Exposure: Many FTSE 100 companies operate internationally, with a significant portion of their revenue coming from abroad.

Stable & Large-Cap: The index is generally dominated by large-cap companies that are well-established and tend to have a stable revenue stream.

Sectoral Diversity: It spans several key sectors, such as energy, banking, and consumer goods.

What is the FTSE 250?

The FTSE 250 index, on the other hand, includes the next 250 largest companies listed on the London Stock Exchange by market capitalization, making it the second tier of the FTSE indices. The FTSE 250 represents mid-sized companies, typically ranging from market capitalizations of around £1 billion to £10 billion.

Unlike the FTSE 100, which contains globally recognized multinational corporations, the FTSE 250 is more focused on the UK market. While some FTSE 250 companies are still international players, many derive a larger portion of their revenue from the UK and Europe. The FTSE 250 also tends to have a higher growth potential than the FTSE 100, though it may come with slightly higher risks.

Key Features of the FTSE 250:

Market Capitalization: Composed of the next 250 largest companies by market cap after the FTSE 100.

Primarily UK-Focused: Many of the companies in the FTSE 250 are more focused on the UK and European markets compared to the FTSE 100.

Growth Potential: Mid-cap companies often have more growth potential than large-cap firms, although this comes with increased volatility and risk.

Sector Concentration: While still diverse, the FTSE 250 may have a stronger concentration in industries such as manufacturing, retail, and technology.

Key Differences Between the FTSE 100 and FTSE 250

While both indices reflect the performance of UK-listed companies, they differ in several important ways:

Size and Composition:The FTSE 100 consists of the largest 100 companies by market cap, while the FTSE 250 includes the next 250 largest companies. The FTSE 100 is typically made up of large-cap, multinational companies, while the FTSE 250 is composed of mid-cap firms.

Exposure to Global Markets:FTSE 100 companies often have significant exposure to global markets, with much of their revenue coming from overseas. This makes the FTSE 100 less sensitive to UK-specific economic conditions and more impacted by global events. The FTSE 250, on the other hand, is more UK and European-focused, with many companies deriving a significant portion of their revenues from the domestic market.

Risk and Reward: The FTSE 100 is generally considered more stable due to the size and maturity of the companies it tracks. Conversely, the FTSE 250 offers higher growth potential, but it also comes with more volatility and risk. For investors seeking a safer, more predictable return, the FTSE 100 may be more appealing, while those looking for growth opportunities may be attracted to the FTSE 250.

Dividend Yields: The FTSE 100 tends to have higher dividend yields, as many of its large companies are established, stable firms that generate consistent profits. In contrast, the FTSE 250 companies may offer lower dividend yields but can provide higher growth prospects, especially in emerging sectors.

Market Impact: The performance of the FTSE 100 is often seen as a barometer for the overall health of the UK economy, as it includes many of the country’s largest and most influential companies. The FTSE 250, being more focused on mid-sized firms, offers insights into the growth potential of the UK economy and is often seen as an indicator of domestic economic conditions.

Which Index Should You Invest In?

Deciding between investing in the FTSE 100 or the FTSE 250 depends largely on your investment goals, risk tolerance, and time horizon.

FTSE 100: If you are seeking a stable, reliable investment with international diversification, the FTSE 100 may be more suited to your portfolio. The large-cap companies in this index are established and generate stable returns, though they may not offer the same growth potential as smaller firms.

FTSE 250: If you are looking for higher growth potential and are willing to accept more volatility and risk, the FTSE 250 could be a better fit. Many mid-cap companies in this index are expanding rapidly, making it a strong option for investors looking to capitalize on growth opportunities within the UK.

Conclusion

Both the FTSE 100 and FTSE 250 play critical roles in representing the UK stock market. The FTSE 100 offers stability and global exposure through large-cap companies, while the FTSE 250 offers higher growth potential through mid-cap firms with a more domestic focus. Understanding the differences between these indices can help you make more informed investment decisions, whether you're seeking long-term stability or looking for opportunities with higher growth potential.

Choosing between the two depends on your financial goals, risk appetite, and preference for growth or stability in your investment strategy.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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Warren Takunda

Cryptocurrency

Bitcoin rallied about 4% this week, indicating solid demand at lower levels. The United States spot Bitcoin exchange-traded funds (ETFs) witnessed outflows of $242.3 million on Jan. 2 but bounced back with a vengeance on Jan. 3 with inflows of $908.1 million, per Farside Investors data. This suggests that investors expect Bitcoin to resume its uptrend.

Another positive for Bitcoin is that the selling pressure could be reducing. According to CryptoQuant data, Bitcoin exchange inflow — the total amount of Bitcoin transferred to exchanges — dropped in December from the Nov. 25 peak of 98,748 Bitcoin. Similarly, miner outflows have also declined since the Nov. 11 peak, when miners sent 25,367 Bitcoin to exchanges. Bitcoin Price Move Above $100K Could Pull SOL, SUI, ICP, and ENA Higher_1

Bitcoin Price Move Above $100K Could Pull SOL, SUI, ICP, and ENA Higher_1

Crypto market data daily view. Source: Coin360

However, in the near term, Bitfinex analysts told Cointelegraph that Bitcoin could consolidate between $95,000 and $110,000 till the end of January. The analysts do not expect US President-elect Donald Trump’s inauguration on Jan. 20 to act “as a significant price appreciation event.”

If Bitcoin rises above $100,000, select altcoins are likely to move higher. Let’s look at the charts of the top 5 cryptocurrencies that may outperform in the near term.

Bitcoin price analysis

Bitcoin rose and closed above the moving averages on Jan. 3, indicating that the selling pressure is reducing. Bitcoin Price Move Above $100K Could Pull SOL, SUI, ICP, and ENA Higher_2

Bitcoin Price Move Above $100K Could Pull SOL, SUI, ICP, and ENA Higher_2

BTC/USDT daily chart. Source: Cointelegraph/TradingView

The bulls will try to strengthen their position by pushing the price above the formidable resistance at $100,000. If they succeed, the BTC/USDT pair could surge to the all-time high of $108,353. Sellers are expected to fiercely defend the level, but if the buyers bulldoze their way through, the pair could rally toward $126,706.

Instead, if the price turns down sharply from $100,000 and breaks below the moving averages, it will suggest a consolidation in the short term. The pair may oscillate between $90,000 and $100,000 for a few days. Bitcoin Price Move Above $100K Could Pull SOL, SUI, ICP, and ENA Higher_3

Bitcoin Price Move Above $100K Could Pull SOL, SUI, ICP, and ENA Higher_3

BTC/USDT 4-hour chart. Source: Cointelegraph/TradingView

The 20-exponential moving average on the 4-hour chart is sloping up, and the relative strength index (RSI) is near 62, signaling that buyers have an edge. The price has bounced off the 20-EMA, and the bulls will next try to clear the overhead hurdle at $100,000. If they do that, the pair may rise to $102,800 and then to $105,350.

Conversely, a break below the 20-EMA will weaken the bulls. The pair may then drop to the 50-simple moving average.

Solana price analysis

Solana is facing resistance at the 50-day SMA ($219), but a positive sign is that the bulls have not ceded much ground to the bears. Bitcoin Price Move Above $100K Could Pull SOL, SUI, ICP, and ENA Higher_4

Bitcoin Price Move Above $100K Could Pull SOL, SUI, ICP, and ENA Higher_4

SOL/USDT daily chart. Source: Cointelegraph/TradingView

The 20-day EMA ($204) has started to turn up, and the RSI is in the positive zone, indicating that buyers have the upper hand. If the price turns up from the current level or rebounds off the 20-day EMA, the bulls will again try to propel the SOL/USDT pair above the 50-day SMA. If they can pull it off, the pair may rise to $234 and subsequently to $247.

This optimistic view will be negated if the price turns down and breaks below the 20-day EMA. That could pull the price down to the uptrend line, indicating that bears are active at higher levels. Bitcoin Price Move Above $100K Could Pull SOL, SUI, ICP, and ENA Higher_5

Bitcoin Price Move Above $100K Could Pull SOL, SUI, ICP, and ENA Higher_5

SOL/USDT 4-hour chart. Source: Cointelegraph/TradingView

The pair formed an ascending triangle pattern on the 4-hour chart, indicating that the correction may be over. If the price slips below the 20-EMA, a retest of the $202 level is possible. Sellers will have to pull the price below $202 to seize control.

Alternatively, a strong bounce off the 20-EMA or the $202 support will improve the prospects of a break above $220. If that happens, the pair is likely to resume the uptrend toward the pattern target of $229.

Sui price analysis

Sui resumed its uptrend after buyers pushed the price above the stiff overhead resistance of $4.96 on Jan. 03. Bitcoin Price Move Above $100K Could Pull SOL, SUI, ICP, and ENA Higher_6

Bitcoin Price Move Above $100K Could Pull SOL, SUI, ICP, and ENA Higher_6

SUI/USDT daily chart. Source: Cointelegraph/TradingView

The bears will try to trap the aggressive bulls by pulling the price back below the breakout level of $4.96. If they do that, the SUI/USDT pair could drop to the 20-day EMA ($4.49). Sellers will have to yank the price below $3.94 to signal that the pair may have topped out in the near term.

On the contrary, a solid bounce off $4.96 will signal that the bulls are trying to flip the level into support. That could start a rally to $6.28. Bitcoin Price Move Above $100K Could Pull SOL, SUI, ICP, and ENA Higher_7

Bitcoin Price Move Above $100K Could Pull SOL, SUI, ICP, and ENA Higher_7

SUI/USDT 4-hour chart. Source: Cointelegraph/TradingView

The pair pulled back from $5.36, signaling a possible retest of the breakout level of $4.96. The upsloping 20-EMA and the RSI in the overbought zone suggest that buyers remain in control. If the price turns up from the current level or rebounds off $4.96, it will signal buying on dips. That increases the possibility of the resumption of the uptrend.

Contrary to this assumption, a break and close below the 20-EMA will suggest profit-booking by the bulls. The pair may sink to $4.60 and later to the 50-SMA.

Internet Computer price analysis

Internet Computer (ICP) surged above the moving averages on Jan. 3, indicating a potential change in the short-term trend. Bitcoin Price Move Above $100K Could Pull SOL, SUI, ICP, and ENA Higher_8

Bitcoin Price Move Above $100K Could Pull SOL, SUI, ICP, and ENA Higher_8

ICP/USDT daily chart. Source: Cointelegraph/TradingView

The recovery is facing selling near $13, but the moving averages are likely to act as strong support on the way down. If the price rebounds off the moving averages with strength, it will signal that the sentiment remains positive. The ICP/USDT pair may climb to $14 and later to $15, where the bears are expected to mount a strong defense.

This positive view will be invalidated in the near term if the price turns down and breaks below the 20-day EMA ($11.23). The pair may then descend to $9.60. Bitcoin Price Move Above $100K Could Pull SOL, SUI, ICP, and ENA Higher_9

Bitcoin Price Move Above $100K Could Pull SOL, SUI, ICP, and ENA Higher_9

ICP/USDT 4-hour chart. Source: Cointelegraph/TradingView

The pair completed a bullish ascending triangle pattern on the 4-hour chart, indicating buying at lower levels. Buyers are expected to vigorously defend the 20-EMA. If they do that, the likelihood of a rally above the $12.74 resistance increases. That could start a rally to the target objective of $13.96.

The zone between the 20-EMA and $11.39 is expected to act as a strong support. Sellers will have to tug the price below $11.39 to signal a comeback.

Ethena price analysis

Ethena has formed a cup-and-handle pattern, which will complete on a break and close above $1.30. Bitcoin Price Move Above $100K Could Pull SOL, SUI, ICP, and ENA Higher_10

Bitcoin Price Move Above $100K Could Pull SOL, SUI, ICP, and ENA Higher_10

ENA/USDT daily chart. Source: Cointelegraph/TradingView

The 20-day EMA ($1.04) has started to turn up, and the RSI is in the positive territory, indicating an advantage to buyers. If bulls drive the price above $1.30, the ENA/USDT pair could rally to $1.52 and thereafter to $1.72. The pattern target of the bullish setup is way higher at $2.41.

The support on the downside is at $1.10 and then at the 20-day EMA. A break and close below the 20-day EMA will suggest that the bulls are losing their grip. The pair may then slump to $0.88. Bitcoin Price Move Above $100K Could Pull SOL, SUI, ICP, and ENA Higher_11

Bitcoin Price Move Above $100K Could Pull SOL, SUI, ICP, and ENA Higher_11

ENA/USDT 4-hour chart. Source: Cointelegraph/TradingView

The bulls tried to push the price above $1.30, but the bears held their ground. The pair may drop to the 20-EMA, which is an important level to watch out for. If the price rebounds off the 20-EMA with force, it will signal that the bulls remain in command. That will improve the prospects of a rally above $1.30.

Contrarily, a break and close below the 20-EMA will suggest that the bulls are booking profits. That may pull the price to the 50-SMA.

Source: Cointelegraph

Risk Warnings and Disclaimers

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Warren Takunda

Economic

Global markets are set to return to a normal trading week following the holiday season. Wall Street failed to achieve a Christmas rally as profit-taking caused a broad-based pullback.

Last week, markets extended the trends from the year-end, with the US dollar continuing to reach a fresh two-year high, and the global stock markets were in a retreat.

In Europe, rising energy prices, particularly natural gas, may exert upward pressure on inflation and weigh on the euro. However, gains in oil and gas stocks have partially offset losses in other sectors.

This week, the spotlight will be on the eurozone’s flash inflation data for December, which could influence the European Central Bank’s (ECB) monetary policy stance.

Meanwhile, US non-farm payroll data will provide key insights into the labour market and guide expectations for the Federal Reserve’s next rate decisions.

Europe

The Eurozone inflation will likely tick up in December according to consensus estimates. In November, the headline consumer price index came in at 2.2%, up from 2% in the previous month.

Consumer price is expected to continue increasing by 2.4% in December. The core inflation, excluding volatile items such as food and energy, is forecast to remain at 2.7%.

Preliminary inflation readings from Germany, France, and Italy will also be released, with all expected to reflect an upward trend. The ECB indicated that inflation was on track to achieve the 2% target at some point in 2025.

Economists expect the bank to further reduce the interest rate by at least 100 basis points this year. However, rising energy prices and uncertainties surrounding Trump’s presidency could complicate the outlook.

Additionally, Spain and Italy will release their services PMIs for December. Consensus forecasts suggest improvements, with Italy’s business activity potentially returning to expansion following a sharp decline in November.

Final services PMIs for France and Germany are also due, with both expected to align with flash estimates. Preliminary data indicates that France’s services sector experienced a downturn for the fourth consecutive month in December.

United States

The US job data remains a key focus for the global markets, providing clues for the Fed’s future rate decisions. In November, the United States added 227,000 new jobs and the unemployment rate rose to 4.2% from 4.1% in the previous month.

Consensus forecasts that non-farm payrolls may have increased by 153,000 in December and the jobless rate has stayed at 4.2%. These figures suggest a cooling labour market and that the Fed should continue its easing cycle.

The FOMC meeting minutes will also be critical for investment sentiment. The Fed shifted to a more hawkish stance when it cut the interest rate in December as employment data proved stronger than anticipated in recent months.

The Fed’s dot plot now projects a 50 basis point rate cut in 2025, down from the full percentage point cut forecast in September.

Asia-Pacific

In Asia, China will be due to release its CPI and Producer Price Index for December. Consumer prices rose 0.2% year on year in November, down from 0.3% in the previous month, and was the softest increase since June.

Consensus forecasts that CPI for December will increase by 0.1%, suggesting that the world’s second-largest economy remains under disinflationary pressure due to sluggish consumer demands.

The producer price dropped by 2.5% year-on-year and was in deflation for the 26th consecutive month in November. The data is expected to continue the trend in December.

Australia is also set to release its monthly CPI for November. Consensus forecasts that inflation may have slightly ticked up to 2.2% from 2.1% in the previous month.

Many economists project that the Reserve Bank of Australia will commence the easy cycle by cutting its rate by 25 basis points in May 2025.

Source: Euronews

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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Alex

Forex

The Euro is setting forth a second day of recovery and trades above 1.0350 at the time of writing on Monday, heading further away from the fresh 2-year low of 1.0224 seen on Thursday. The positive move is further bolstered by the December Purchasing Managers Index (PMI) releases, with Spanish, Italian, French, German, and the broader Eurozone data recovering from prior month readings and beating expectations.

Markets are also sending the Euro higher due to global political turmoil. Italian Prime Minister Giorgia Meloni broke the unified European ranks by visiting President-elect Donald Trump at Mar-a-Lago, while Canadian Prime Minister Justin Trudeau is set to resign this week, according to Bloomberg News.

Meanwhile, markets are bracing for the first normal trading week of the year regarding the economic calendar. Traders will return to their trading desks, and financial markets are expected to run back to their normal capacity. It is a very packed calendar for both Europe and the US, with the US Nonfarm Payrolls release on Friday as the main focal point for this week.

Daily digest market movers: Euro strikes back

The Spanish HCOB PMI for the Services sector came in at 57.3, above the 54.1 expected and the 53.1 previous reading.The Italian HCOB Services PMI recovered from contraction and came in at 50.7, above the 50.0 estimate and better than the previous 49.2 reading.France’s HCOB Services PMI rebounded to 49.3, coming from 48.2 the previous month and beating the estimate of 48.2.Germany’s HCOB Services PMI reading came in at 51.6, above the estimate and previous reading of 51.4. The German Consumer Price Index (CPI) is set to be released at 13:00 GMT. The December preliminary reading is expected to tick up by 0.4% on a monthly basis compared to the -0.2% in the prior month. The preliminary CPI is expected to rise to 2.4% year-over-year.At 14:45 GMT, S&P Global will publish the US Services PMI reading. The final December reading is expected to remain stable at 58.5.

Technical Analysis: EUR/USD tries to head back to 1.04

EUR/USD has seen traders quickly add to their short positions that were unwinded before Christmas, triggering a meltdown to 1.0224 last week. With the oversold Relative Strength Index (RSI), a bounce could unfold to 1.04 or even 1.0448 if the current European data adds to the momentum.

On the upside, the 1.04 big figure is the first level to watch for. Next is the pivotal level at 1.0448, the low of October 3rd, 2023. Once through that level, the 55-day Simple Moving Average (SMA) at 1.0565 comes into play.

On the downside, the current two-year low at 1.0224 is the first support to be retested. Further down, the pivotal level at 1.02 would mean a fresh two-year low. That would open up the room to head to parity, with 1.0100 as the last man standing before that magical 1.00 level.

Euro Extends Recovery as Markets Digest Political Turmoil_1

Source：FXStreet

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AUD/JPY continues to gain ground for the third consecutive day, trading around 98.50 during the European hours on Monday. This upside of the AUD/JPY cross is attributed to the improved Australian Dollar (AUD) following the release of the Judo Bank Australia Purchasing Managers' Index (PMI) and the Caixin Services PMI for China. Given their close trade relationship, fluctuations in China’s economy often have a notable impact on Australian markets.

The Judo Bank Australia Composite PMI for December 2024 was revised upward to 50.2 from an earlier reading of 49.9, signaling a third consecutive month of modest growth in private sector output. This growth was primarily driven by the services sector, while manufacturing output continued to contract. The Services PMI was also revised higher to 50.8 from 50.5 in November, representing the eleventh consecutive month of expansion in the services sector.

In China, the Caixin Services PMI increased to 52.2 in December 2024, up from 51.5 in November, surpassing market expectations of 51.7. This marks the fastest growth in the Chinese services sector since May, reflecting robust performance.

On Monday, Reuters reported that the Shanghai Stock Exchange has committed to deepen capital markets opening during a meeting with foreign institutions. China’s economy is underpinned by solid fundamentals and demonstrates resilience amid a complex global environment.

In Japan, composite and services PMIs for December were revised lower, reinforcing a dovish outlook on the Bank of Japan’s (BoJ) policy and exerting downward pressure on the Japanese Yen (JPY). The Jibun Bank Japan Services PMI was revised down to 50.9, falling short of the anticipated 51.4. Despite the downward revision, the reading improved from November’s 50.5, marking the second straight month of growth and the fastest pace since September.

Meanwhile, the Jibun Bank Japan Composite PMI rose to 50.5 in December from 50.1 in November, marking the second consecutive month of growth. While indicative of only marginal expansion, this was the strongest reading in three months. The increase was driven by modest growth in the services sector, alongside a softer contraction in manufacturing output.

Source：FXStreet

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How Successful Forex Traders Use Risk-to-Reward Ratios to Maximize Profit

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Why Successful Forex Traders Focus on Risk-to-Reward Ratios

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Practical Example: Using the Risk-to-Reward Ratio

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5 Signs That Indicate It's Time to Change Your Trading Strategy

1. You Are Experiencing Consistent Losses

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4. You’re Not Learning from Your Mistakes

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5. You Are No Longer Achieving Your Financial Goals

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How to Effectively Change Your Trading Strategy

Conduct a Self-Assessment

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BTC/USDT daily chart. Source: Cointelegraph/TradingView

BTC/USDT 4-hour chart. Source: Cointelegraph/TradingView

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SOL/USDT daily chart. Source: Cointelegraph/TradingView

SOL/USDT 4-hour chart. Source: Cointelegraph/TradingView

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SUI/USDT 4-hour chart. Source: Cointelegraph/TradingView

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ICP/USDT daily chart. Source: Cointelegraph/TradingView

ICP/USDT 4-hour chart. Source: Cointelegraph/TradingView

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ENA/USDT daily chart. Source: Cointelegraph/TradingView

ENA/USDT 4-hour chart. Source: Cointelegraph/TradingView

Source: Cointelegraph

Market Lookahead: Eurozone Inflation and US Job Data Take Centre Stage

Europe

United States

Asia-Pacific

Source: Euronews

Euro Extends Recovery as Markets Digest Political Turmoil

Daily digest market movers: Euro strikes back

Technical Analysis: EUR/USD tries to head back to 1.04

Source：FXStreet

AUD/JPY Holds Gains Near 98.50 After the Release of PMI Data

Source：FXStreet

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