3.17.2009

EUR/USD Hits Two Months' High

The European currency may gain further after Germany rebuffed a U.S. plan to increase fiscal stimulus to help pull the global economy out of recession. The fact the Euro-Zone nations avoided making any fresh commitments to extend spending, should encourage more investments in Europe and, as a result, to boost the EUR currency.



USD - USD Hits 5 Weeks Low against the EUR

The Dollar pared losses against the EUR on Monday after the New York Federal Reserve Bank's manufacturing index fell to a record low in March, adding to worries about the U.S. economy. The USD experienced some gains, rising to $1.3000 from around $1.3055 yesterday, however it still remained down 0.9% during the trading session.

Moreover, economic data published yesterday imply that the U.S. recession is likely to deepen further. To give an example of the type of negative data emanating from the American economy, the Empire State Manufacturing Index had its worst showing since 2001! This is also a signal that economic difficulties are starting to spread from the financial sector into the mainstream economy. Investors will have to adapt themselves to the upcoming economic hardships as these changes will not rectify themselves within a short period of time.

Later today, there are several important economic data releases coming out of the U.S. The most important of these publications is the Building Permits indicator at 12:30 GMT. The release is expected to be lower than the previous figure, meaning the USD could continue a level of bearishness today. Traders should stay close to the market as there is a strong chance to capitalize on the fluctuations which will likely follow this release.

EUR - EUR Gains against Major Currencies

The EUR experienced a bullish trading session yesterday, as it appreciated against most of its major currency pairs. The 16 nation's currency hit a five-week high against the USD yesterday as gains in European stocks signaled investors' willingness to take on more risk.

A rise in Euro-Zone inflation last month helped push the EUR above $1.30 for the first time since Feb. 10 in early trading. A pledge by the G20 finance ministers during a weekend summit to double the resources available to aid emerging market economies also lifted spirits.

In addition, European Central Bank (ECB) President Trichet said last week that deflationary risks were negligible, even as he left the door open to another Interest Rate cut. The central bank, which expects inflation to average just 0.4% this year, has already reduced its key Rate by more than half since early October to a record low of 1.5%.

Looking ahead to today, the most important financial indicator scheduled to be released from Europe is the German ZEW Economic Sentiment. Analysts are forecasting this figure to slightly decrease from its previous reading. Traders will be paying close attention to today's announcement as a stronger than expected result may continue to boost the EUR in the short-term.

JPY - Yen Slides on Weakening Economy

The Japanese Yen completed yesterday's trading session with mixed results versus the major currencies. The JPY fell against the EUR yesterday, pushing the oft traded currency pair to 1.2171. The JPY experienced similar behavior against the GBP as the pair rose from 137.50 to 138.50 by days end.

The Yen's safe-haven appeal has, however, lost some of its luster due to a rapid deterioration in Japan's economy, with the trade balance falling into deficit, and political uncertainty with an unpopular government facing an election that must be held by October. The Bank of Japan is seen likely to keep Interest Rates unchanged at 0.10% at a two-day policy meeting that ends on Wednesday. The BOJ is also expected to discuss whether to raise its purchases of government debt but market players are unsure if the central bank will make such a move at this week's board meeting. The Bank may be forced to increase purchases of government bonds if the country's economic slump deepens suddenly or banks start to fail, moving closer to a quantitative easing policy it has been trying to avoid.

OIL - Crude Oil Prices Soar $3 Higher

The Crude Oil's gains on Monday were helped in part by an early rally in U.S. and European stock markets on growing confidence in the banking sector, which outweighed Organization of the Petroleum Exporting Countries (OPEC) decision not to cut production target further.
The cartel which met on Sunday, decided not to cut output further, but rather concentrate on existing cuts that total 4.2 million barrels per day since September. Some analysts said OPEC's adherence to the existing cuts might be enough to offset falling demand and reverse the recent increases in oil inventories in many countries, including the world's largest oil consumer, the United States. However, in light of U.S grim economic data which confirms that long recession in the world's largest economy is far from over, the Crude might fall below $47 giving up its previous session's gains.

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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!