3.13.2009

G20 Summit on Economy Kicks-Off Today

The finance ministers and central bankers from the top 20 industrialized nations are set to begin another economic summit today in which a multitude of recent concerns about the economy will likely be addressed. These meetings, which can last days, have an indirect impact on the market and decisions reached during its meetings are typically implemented at a much later date. It is important for forex traders to follow any statements made regarding stimulus packages and interest rate cuts, however, as these will offer insight into future monetary policy decisions by the central banks.



USD - Dollar Moves on Stock Market Gains

The Dollar recorded an extremely volatile session yesterday as the American stock market made massive gains on Thursday. The Dow Jones climbed an impressive 240 points, or 3.5%.This was owed to a number of diverse factors, such as General Electric revealing that losing its AAA rating won't hurt the company, General Motors stating that it won't need government loans this month, and better-than-expected retail sales figures helped push-up stocks too. This led the Dollar to make big moves against its major currency crosses. Against some currencies it made gains, and against others, like the EUR, it recorded heavy losses.

The Dollar dropped 100 points against the EUR to close down at 1.2924 in yesterday's trading, as investors decided to take some riskier assets. The Dollar also made losses against the Pound. This is more likely to be a correction in the pair, as the Pound has lost a lot of ground against the greenback as of late. The British currency gained 50 points against the USD to close at 1.3918. The Dollar, however, recorded a 150 point gain vs. the Yen as it closed at 97.63.

Other news owing to the bullish U.S. stock market and the fall in the Dollar's value against the EUR yesterday was Bank of America, JP Morgan, and Citigroup reporting impressive figures, leading to more risk taking yesterday. If the trend continues, this will mark a turning point in the current recession. In turn, this would mean a lot for the forex market. Thus, investors would abandon the current safe-haven Dollar en masse and return to currencies such as the GBP and EUR. However, to be safe, the global economic situation should only be judged on a daily basis.

Today, we have some important economic data releases coming out of the U.S. before the weekend kicks in. There are the U.S. Trade Balance figures at 12:30 GMT and the Preliminary University of Michigan (UoM) Consumer Sentiment report at 13:55 GMT. Better-than-expected figures may push the EUR/USD rate up to the 1.3000 level by Friday's close. It is also advisable for traders to pay close attention to whether the Euro-Zone will reveal whether or not they will make rate cuts close to 0% in the coming months.

EUR - EUR Gains against Major Currencies

The EUR made notable gains against all of its major currency pairs in Thursday's trading. This comes about as the stock markets of the Euro-Zone made similar gains, much inspired by the rally on Wall Street. There was also a leap in confidence yesterday, as President of the European Central Bank (ECB), Jean-Claude Trichet, revealed that he will be very aggressive at tackling the economic crisis, more than many analysts had originally forecasted.

Trichet revealed that he plans on cutting the overnight lending rate to 0.5%. In the short-term, this has resulted in an increase in demand for the European currency. This recent news is likely to lead to much volatility in the coming weeks between the EUR and its main currency pairs and crosses.

The EUR gained 40 points against the British Pound in yesterday's trading to close at 0.9284. It nearly gained 300 points vs. the JPY to close at 126.24. This result is also owed to the stock market rally in Japan and the poor Japanese GDP figures, showing that Japan's economy shrunk by 3.2% in the 4th quarter of 2008, the worst figures since 1974. Against the Dollar, the EUR rose 100 points to 1.2924, as investors took up riskier assets.

Looking ahead to today, there is some important news coming out of the Euro-Zone. The German Wholesale Price Index (WPI) will be released at 7:00 GMT, and the Retail Sales figures are set to be released at 10:00 GMT. If these figures match expectations, the EUR is likely to build on yesterday's gains against its major currency pairs. There may be other factor's affecting the EUR's strength later today, such as investors profiting from current market conditions ahead of the weekend.

JPY - JPY Slides on Poor GDP Data and Stock Market Rally

The JPY slid in Thursday's trading owing to 2 factors. First, the recent publication of Japan's poor GDP figures showing that her economy shrunk by 3.2% in the 4th quarter of 2008, the sharpest fall since 1974. The second factor that led to the very weak Yen yesterday was the stock market rally in Japan, inspired by Wall Street. The Nikkei rose by over 300 points, or 4%, as investors dropped the safe-haven Yen. Shares such as Sony, Canon, and Japan's banking sector made notable gains. This was the push that Japan needed to show that there may be light at the end of the tunnel. Maybe we are seeing a turnaround in economic fortunes for Japan?

The JPY made large losses against its major currency crosses. Against the Dollar, the Japanese currency fell by 150 points to close at 97.63. The JPY dropped a massive 300 points vs. the EUR, as there was renewed confidence yesterday due to the Euro-Zone's fiscal policy, and the move away from less risky assets. The Pound also gained against the JPY by 250 points to finish yesterday's trading session at 135.93, reversing losses that the Pound made in recent days. Revised Industrial Production and Household Confidence figures may determine the JPY's strength in early trading today. However, as the day goes on, the Yen will be impacted more and more by developments coming out of the U.S. and the Euro-Zone.

Oil - Crude Oil Prices Soar $4 Higher

The price of Crude Oil for April delivery soared a dramatic $4 a barrel in Thursday's trading to $46.60. This comes about as ministers from the Organization for Petroleum Exporting Countries (OPEC) are set to meet this coming Sunday. Officials in Saudi Arabia and Libya revealed that there may be a decision on further production cuts at their next meeting. However, ministers from OPEC failed to go into detail. There is concern, however, about the destabilizing economic situation on Oil prices.

Throughout this week, Oil prices have continued to be volatile as the upcoming meeting for OPEC in Vienna approaches. On Wednesday, for example, Crude prices dropped dramatically, after a higher-than-forecasted storage of Oil that was published in the Crude Oil Inventories report in the U.S. It seems that these losses have now been overcome. We will have to wait until Sunday's meeting for the surprises that OPEC's oil ministers have for us.

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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!