3.30.2009

US Dollar Extends Gains as Stocks, Commodities Tumble in Asian Trading (Euro Open)

The Euro and the British Pound slipped as much as -0.6% against the US Dollar in overnight trading as a slump in risky assets fueled demand for the safe haven asset du jour. Stocks fell for the first time in six days across Asian exchanges and commodities followed on speculation that persistently sluggish economic growth will curb demand.

Key Overnight Developments

• Japan's Industrial Production Falls to Record Low on Weak Overseas Demand
• Australian Home Sales Rise on Rate Cuts, Government Grants

Critical Levels



The Euro and the British Pound slipped as much as -0.6% against the US Dollar in overnight trading as a slump in risky assets fueled demand for the safe haven asset du jour.

Asia Session Highlights



Japan’s Industrial Product shrank fell -38.4% in the year to February, setting a new record low. The theme at work is a familiar one: dwindling overseas sales are pushing Japanese companies to cut back output, boosting unemployment to put downward pressure on consumer spending and overall economic growth. Later this week, the Tankan survey of business confidence is expected to show sentiment is at the worst in over three decades. Policymakers have scrambled to check the deepening downturn: the Bank of Japan has agreed to expand liquidity-boosting measures while the Finance Minister has pushed for trillions of yen in additional fiscal stimulus. Ironically, the sheer depth of the current malaise may help to spur the recovery. Increasingly dismal economic data has turned risk-averse investors away from the Japanese Yen, sending the currency tumbling by a hefty -12.2% to date from the peak high January. Sustained downward momentum will encourage overseas sales by making Japanese goods cheaper for foreign buyers, breathing new life into the export-dependent economy.

In Australia, HIA New Home Sales grew 3.9% through February, boosted by aggressive interest rate cuts as well as cash handouts to first-time home buyers put in place as part of the Prime Minister Kevin Rudd’s fiscal stimulus package. The Reserve Bank of Australia has trimmed benchmark borrowing costs to 3.25%, a 45-year low, while the government has tripled the available grant for home buyers to A$21,000. Additional monetary stimulus is also expected, with overnight index swaps pricing in 50 basis points in rate cuts over the next 12 months.

Euro Session: What to Expect



Euro Zone Economic Confidence is set to remain at a 24-year record low for the second consecutive month in March. The reading is a composite of several surveys measuring the confidence among consumers as well as the industrial, services, and construction sectors. The result reflects expectations that the current economic downturn will continue in the near to medium term.

On balance, risk trends are likely to emerge as the primary driver of forex price action. Stocks fell for the first time in six days across Asian exchanges as fears of deepening recession returned to the forefront and drove investors back towards safe-haven assets. The MSCI Asia Pacific Index slipped 2%. Comments from Jamie Dimon and Ken Lewis, CEOs of JPMorgan and Bank of America, further weighed on confidence. Dimon said March was “a little tougher” while Lewis said his bank’s lending book was not as good in the last month of the first quarter as the first two. Commodities followed equities lower on speculation that persistently sluggish economic growth will curb demand. US equity index futures are down about 1% ahead of the opening bell in Europe, suggesting the selloff is set to continue and implying the US Dollar is likely to extend recent gains.

Written by Ilya Spivak, Currency Analyst
Article Source - US Dollar Extends Gains as Stocks, Commodities Tumble in Asian Trading (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!