3.19.2009

Euro, British Pound Consolidate Gains After Dovish FOMC Sparks Rally (Euro Open)

The Euro and the British Pound consolidated in narrow ranges in overnight trading after an unexpectedly dovish statement from the US Federal Reserve triggered a US Dollar selloff, pushing EURUSD and GBPUSD sharply higher. Switzerland’s Trade Balance and ZEW survey of investor confidence are on tap in European hours.

Key Overnight Developments

• Australian Annual Car Sales Lowest in 7 Years
• Japan May Inject Capital into Failing Companies, Says LDP Chief
• Euro, British Pound Consolidate After FOMC Sparks Rally

Critical Levels



The Euro and the British Pound consolidated in narrow ranges in overnight trading after an unexpectedly dovish statement from the US Federal Reserve triggered a US Dollar selloff, pushing EURUSD and GBPUSD sharply higher.

Related Article: Euro Unlikely To Sustain Gains Against the US Dollar, Selling Opportunity Ahead

Asia Session Highlights



Australian New Motor Vehicle Sales tumbled to a fresh 7-year low, falling -18.6% in the year to February. Passenger vehicle sales fell -3.8% from the previous month while sport utility sales dropped -1.7%. Most alarmingly, the decline was led by a -4.4% drop in the “other vehicles” subset of the data which includes utility transports, vans, and trucks. The negative implications here extend well beyond pointing to sluggish consumer spending, alluding to a sharp slowdown in business activity. This alludes to continued weakness in employment and by extension overall economic growth. Yesterday, a leading index compiled by Westpac Banking Corp predicted Australia is already in recession.

Japan’s government needs to prevent bankruptcies at large companies with injections of public capital said Hiroyuki Hosoda, secretary-general of the LDP party. “Should a big company go bankrupt, 10,000 people could lose their jobs,” Hasoda cautioned, “Preventing that is our top priority.” The LDP is expected to propose new measures to bolster balance sheets before the end of the 2008 fiscal year at the end of this month to prevent a “March crisis” of massive corporate failures.

Euro Session: What to Expect



Switzerland’s annual Trade Balance is likely to see the surplus continue to narrow in February despite a surprising rebound in January’s monthly reading. The month-to-month figure is notoriously volatile and looking at annual trends in trade flows is much more indicative. To that effect, traders saw exports slumped -11.5% in the year to January, the most in at least 9 years, reflecting a slump in overseas demand as the mountain nation’s main trading partners battle with recession. Exports account for over 54% of overall gross domestic product, suggesting the near-term outlook looks decidedly bleak considering the IMF is forecasting the worst global contraction since World War II. Official government forecasts call for the economy to shrink -2.2% through 2009. Dour economics notwithstanding, the ZEW Survey of investor confidence may advance in March, boosted by the aggressively dovish posture of the central bank: policymakers cut interest rates to 0.25%, announced quantitative easing, and said they were prepared to intervene in forex markets to prevent appreciation of the Swiss Franc.

Written by Ilya Spivak, Currency Analyst
Article Source - Euro, British Pound Consolidate Gains After Dovish FOMC Sparks Rally (Euro Open)
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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!