Euro Rally Threatened with Investor Confidence to See First Drop in Four Months (Euro Open)

The Euro advanced to re-test above 1.30 to the US Dollar in overnight trading as capital flowed into risky assets and pushed stocks higher across most Asian exchanges. The single currency moved higher for 5 consecutive days, adding over 3%. The bulls’ resolve will be tested in European hours as the ZEW survey of investor confidence is set to drop for the first time in four months.

Key Overnight Developments

• Japan's Tertiary Index Unexpectedly Higher on IT Demand
• Australia Has “Flexibility” To Cut Interest Rates Again, Says Central Bank
• Euro, British Pound Follow Risky Assets Higher Against US Dollar

Critical Levels

The Euro and British Pound both pushed higher against the US Dollar in overnight trading as capital flowed into risky assets and pushed stocks higher across most Asian exchanges. The single currency is working to hold above the 1.30 mark while sterling is consolidating above 1.41.

Asia Session Highlights

Japan’s Tertiary Index rose 0.4% in January after two consecutive declines in the previous two months. Information and communication services demand led the reading higher. Importantly, the trend continues to point lower with the metric down -3.9% in annual terms. At this point it remains premature to call this a rebound: dwindling overseas sales are continuing to push Japanese companies to cut back production capacity and boosting unemployment to put downward pressure on consumption, including that of services. Some hope may lay ahead if the recent decline in the Japanese Yen is to be sustained, helping to encourage overseas sales by making Japanese goods cheaper for foreign buyers. The currency has slipped -11.3% to date since topping out in January.

Minutes from the last policy meeting of the Reserve Bank of Australia showed policymakers opted to keep rates on hold in March to access the impact of existing fiscal and monetary measures but maintained that there as scope for further easing. The bank said the near term economic outlook remains “weak” though credit demand seemed to be responding to rate reductions and noted it has “adequate flexibility” to lower borrowing costs again. 

Euro Session: What to Expect

Germany’s ZEW Survey of investor sentiment is expected to drop to -8.0 in March from -5.8 in the previous month, marking the first decline in four months. The measure jumped the most since 1993 in February on hopes that the twin offensives from monetary and fiscal authorities will kick-start growth by the end of this year. Since then, the economic data flow has been less than encouraging: the unemployment rate rose to the highest in 9 months, retail sales fell twice as much as was expected, and the current account surplus shrank to the narrowest in over 3 years as exports tumbled. Meanwhile, the European Central Bank has sharply revised its projections for economic growth and inflation, saying output could shrink as much as -3.2% this year while the pace of price growth falls as low as 0.1%. The analogous reading for the broader Euro Zone is expected to print at -12.0 in March, down from -8.7 in February.

In Switzerland, the State Secretariat for Economic Affairs (SECO) is set to publish the March revision of the government’s economic forecast for 2009. The December issue of the publication cut growth expectations from 1.3% to -0.8% for the current year. A survey of economists conducted by Bloomberg calls for a -1.0% contraction.

Written by Ilya Spivak, Currency Analyst
Article Source - Euro Rally Threatened with Investor Confidence to See First Drop in Four Months (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.


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.
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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!