3.27.2009

Dollar to Move Today on Release of Economic Data

The Dollar has seen increased strength as rising U.S. equity markets helped to erode the dramatic price declines from the previous week. Trading will end this week as a slue of economic data due to be released today will provide ample opportunities for traders to enter the market on higher than normal volatility.



USD - Dollar Recovery Continues

The Dollar rose yesterday against most of its major rivals as riskier currencies fell out of favor. Despite strong gains in U.S. equities, the Dollar gained ground as the likelihood of further European Interest Rate cuts loom over the currency markets. At the end of the Thursday's trading, the EUR/USD was little changed, despite high volatility most of the day. The USD/JPY closed higher at 98.32 from 97.77. Against the Pound the Dollar also finished higher at 1.4481 from 1.4585.

The dramatic sell off of the Dollar appears to have ceased as yesterday's trading was characterized by reduced market risk and future Interest Rate levels. The Dollar was sold heavily last week, sparked by the announcement that the Federal Reserve will begin a quantitative easing program. Slowly the currency markets are returning to relatively normal trading patterns as traders see little reason to take risks on higher yielding currencies in the face of the economic downturn.

Today's trading may be characterized by a glut of economic indicators surrounding consumer spending and attitudes. Due today are personal spending numbers and a revised consumer sentiment report. A better than expected result in the data releases could provide another boost to the Dollar as the currency continues to recoup its losses from last week. Look for the EUR/USD to drop below the 1.3500 level today.

EUR - EUR Set for Further Rate Cuts

The EUR experienced mixed results yesterday as the market begins to price in potential Interest Rate cuts to the European currency. Minor declines were seen against the Dollar, but the EUR climbed consistently against its other currency crosses. The EUR/JPY finished the day higher at 133.41 from 1.3267, and the EUR/GBP ended up at 0.9368 from 0.9301.

Market participants are set to start pricing in the potential for another Interest Rate cut by the European Central Bank (ECB). The ECB is scheduled to meet next week to decide if European Interest Rates will need to be trimmed from their current rate of 1.5%. One politician weighing in on the matter was British Prime Minister Gordon Brow. In a press conference; Brown said he expects that the European benchmark rate would fall below its current level. Perhaps Prime Minister Brown is short on the EUR for obvious reasons.

Traders today will want to pay attention to a few important releases from the Euro-Zone economy and Britain. From Europe we will see new industrial order numbers. This indicator is forecasted to show worsening numbers that highlight the deep recession that plagues Europe. Also we will have Britain's current account figures released. This number may have the potential to surprise the market. Better than expected results could add some buoyancy to the GBP against the EUR in today's European trading session.

JPY - Yen Foresees New Resistance Level

The Yen suffered during yesterday's trading; sliding against the Dollar, but in early morning hours of the Japanese trading session the trend began to reverse. Recent gains in equity markets have proven to be troublesome for the Yen. The Japanese currency has traditionally been used as a safe haven asset, but recent safe haven currency movements have not been kind to the Yen. Perhaps this is due to the underlying weakness in the Japanese economy and the rapid decline of the country's export sector.

The Yen slid against the Dollar to 98.32 from 97.77. Against the Pound the JPY finished down slightly at 142.40 from 142.63. The JPY's most notable loss was against the EUR, as the EUR/JPY level finished up 74 pips at 133.41. The financial year in Japan wraps up at the end of March. With the New Year coming, so may be the 100.00 Yen mark against the Dollar. The resistance level is significant as the USD/JPY has not touched on this valuation since the beginning of November.

Crude Oil - Crude Oil Prices Soar

The price of Crude Oil soared in Thursday's trading session, adding to big gains in the past several weeks. Crude prices finished up slightly over $1.50 or 3% at $53.81. Helping the commodity continue its price appreciation has been the recovery of U.S. equity markets from their New Year lows. What has also helped Crude prices as of late is the increased optimism by from investors, which was initiated last week by a string of positive economic data releases from the U.S.

An uptrend is showing in the last two weeks of trading with a host of a number of factors working in favor of rising Crude Oil prices. The rally in stocks has correlated with the rise in price of Crude Oil. It has also raised hopes that a spike in demand may be coming along with it. Adding support to the price appreciation has been the steadfast commitment by OPEC to continually reduce the supply of Crude Oil. Combine this with a weak U.S. Dollar and it makes for a rally in the price of Oil. Traders may look for a short term price cap of $55 to take profits.

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What is Forex?

If you would go out on a dinner with your friends or family and you mentioned that you were trading on the Forex market most of them wouldn’t know what you were talking about. The worst thing is that most of the Forex traders that join the Forex market don’t know what they are doing. Understanding what Forex is, is the first good step to your success at Forex trading.


The foreign exchange market (Currency, Forex, or FX) is where currency trading takes place. It is where banks and other official institutions facilitate the buying and selling of foreign currencies. Forex transactions typically involve one party purchasing a quantity of one currency in exchange for paying a quantity of another. The foreign exchange market that we see today started evolving during the 1970s when world over countries gradually switched to floating exchange rate from their erstwhile exchange rate regime, which remained fixed as per the Bretton Woods system till 1971.

Today, the Forex market is one of the largest and most liquid financial markets in the world, and includes trading between large banks, central banks, currency speculators, corporations, governments, and other institutions. The average daily volume in the global foreign exchange and related markets is continuously growing. Traditional daily turnover was reported to be over US$3.2 trillion in April 2007 by the Bank for International Settlements. Since then, the market has continued to grow. According to Euromoney's annual Forex Poll, volumes grew a further 41% between 2007 and 2008.

Forex Turnover

Forex Turnover
Main foreign exchange market turnover, 1988 - 2007, measured in billions of USD.
The purpose of Forex market is to facilitate trade and investment. The need for a foreign exchange market arises because of the presence of multifarious international currencies such as US Dollar, Pound Sterling, Yen, etc., and the need for trading in such currencies. Since you aren’t buying anything physical this kind of trading can be confusing. When buying a currency think of it as buying a part in that particular country’s economy because the currency rate reflects the economical situation of the country when compared to others.

Currencies

Currencies
List of most popular currencies on the Forex market

Forex used to be a closed market because only the “big boys” because you needed between 10 and 50 million $ to open an account. But today, with the development of internet, online Forex brokers have the possibility to offer their services to “little” traders. All you need to start is a computer, fast internet connection and information which you can find on this page also.

This enormous market is like the dangerous sea where you can meet lots of sharks and dangerous waters but at the same time it is the only one where two weeks of trading can hypothetically bring you $1,000,000 out of $1,000 of initial investment.

This is certainly hypothetically because a lot of newbie traders deal with their trades as gambling, that surely bring them to having nothing in the end. You should always keep the phrase "be careful!" in your mind. This market would give you its profit possibilities only if you learn the basic things hard and make lots of demo trading.

The statistics is that as much as 95% of traders come to losing their money at Forex, 5% have profit and less than 1% of traders make large fortune at Forex. You shouldn't produce, sell or advertise anything trading at Forex. Your assets are your knowledge, experience and a small amount of cash.

This market is a platform for banks, transnational corporations and individual traders to change the currencies they possess into other ones. This is the spot Forex market. At this market you can trade with up to 1:400 leverage which means that you'll get $400 on your account for each dollar invested. So, you can trade with the $400,000 sum having invested $1,000 onto your account.

Forex is unique among other world markets because in any time of day and night, somewhere in the world, a financial centre is open for business, banks and corporations exchange currency all the time, with a little lower frequency during the weekend.

Why to trade on Forex?

1. There is no commission fee for trading at Forex.
2. There is no intermediary, you can trade directly at Forex.
3. Forex is open 24-hours a day.
4. Nobody can influence the market for a longer period.
5. High liquidity.
6. Free demo accounts, analysis and charts.
7. Small accounts that allow everyone to try out his luck.

Hope this has answered a lot of questions you were asking yourself about Forex and that you can now start trading. Also make sure that you check out other articles on this blog which can help you earn your fortune.

Good luck to everyone!