Forex Markets Stall to Digest US Dollar Selloff in Asian Trading (Euro Open)

Forex price action consolidated in overnight trading after US Dollar selling accelerated in US hours, set off at the open of stateside bond markets as traders reacted to the first leg of the Fed’s purchase of $300 billion in Treasuries to bring down medium- to long-term borrowing costs. German Producer Prices top the calendar in European hours.

Key Overnight Developments

• Euro Stalls, British Pound Lower Against US Dollar in Overnight Trading
• Asian Stocks, US Index Futures Lower Ahead of European Market Open

Critical Levels

The Euro consolidated NY-session gains in overnight trading, oscillating around the 1.3650 level. The British Pound inched lower, losing its grip on the 1.45 mark to shed as much as -0.5% against the US Dollar.

Asia Session Highlights

With no market-moving data on the economic calendar, traders saw forex price action consolidating in overnight trading. The New York session was marked by a sharp US Dollar selloff starting at the open of American bond markets as traders reacted to the first leg of the Fed’s purchase of $300 billion in Treasuries to bring down medium- to long-term borrowing costs. Asian stock exchanges pulled back after seeing the biggest weekly gain since August 2007, with the MSCI Asia Pacific Index slipping -0.9% on profit-taking. US equity index futures are down close to 1%.

Euro Session: What to Expect

Germany’s Producer Prices are set to shrink -0.2% in February, bringing the annual pace of wholesale inflation to a 14-month low at 1.3%. Although the release would typically suggest further downward pressure on consumer prices as manufacturers pass on lower production costs through cheaper finished goods, we saw annual German inflation rebound to 1.0% in February from a 5-year low at 0.9% in the preceding month. The broader Euro Zone consumer price index also inched higher to 1.2% in the year to February, issuing the fist uptick since price growth peaked at 4% in July 2008.

Indicators measuring business and consumer sentiment extended months of losses to set new all-time lows in the same period, so it seems unlikely that this inflation will be of the benign variety that comes with renewing vigor in economic activity. Rather, currency depreciation may be the reason headline inflation is creeping higher. On average, the Euro has fallen -15.6% through February against the currencies of the regional bloc’s top five import partners since peaking in mid-July, raising the cost of foreign-made goods for consumers on the continent. The implications of this trend could be quite ominous considering the pace of price growth is rising even as the economy sinks deeper into recession, limiting the ability of the European Central Bank stimulate growth through monetary policy for fear of letting price growth skyrocket. Where some countries are worried about deflation (falling prices), it seems the Euro Zone could see stagflation (rising prices and falling output) as a real threat in the near term.

Written by Ilya Spivak, Currency Analyst
Article Source - Forex Markets Stall to Digest US Dollar Selloff in Asian Trading (Euro Open)
Forex Markets Stall to Digest US Dollar Selloff in Asian Trading (Euro Open)SocialTwist Tell-a-Friend

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.
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!