USD - Swine Flu puts Downward Pressure on the USD and Tourism
The U.S. Dollar appeared to be losing ground against all of its major currency counterparts towards the end of last week's trading. It dropped to one-week lows against its rivals, falling to 1.3300 against the EUR, 1.4750 against the Pound, and 96.65 against the JPY last Friday. Apparently a number of news events, not wholly related to economic fundamentals, made an impact on the value of the USD last week.
With Ecuador claiming that they will continue to use the USD as their currency, the greenback received a modest level of support from the southern Hemisphere, not necessarily unrelated to President Barack Obama's recent meeting with South American leaders.
In other news, fears of the recent outbreak of swine flu put a major dent in the Dollar as traders began speculating that U.S. tourism would drop in the coming months as a result, and therefore pulled out from the greenback in exchange for an alternative safe-haven. Also, the run-up to the latest round of G7 and IMF meetings put a slightly positive spin on world stocks and the idea of a balanced investment portfolio. This lent weight to the notion of pulling money away from the USD.
The good news for the USD is that it has begun an across-the-board correction during today's early trading hours due to a number of Dollar-positive news events. Recent announcements that Chrysler, an American auto giant, may not need to declare bankruptcy has returned some confidence to the U.S. currency. The impending light news week also has the Dollar prepared to take a seat on the bench for the days ahead. Without driving its own market, the USD is more susceptible to world trends and may therefore be at the mercy of the EUR and JPY this week. With a few potentially damaging reports due, the USD may climb back towards 1.3000 against the EUR and 97.50 against the Yen over the next few days.
EUR - EUR Positive After PMI and Ifo Provide Surprising Results
The EUR gained steady momentum against most of its currency rivals last week. Hitting a one-week high against most of its currency counterparts, the EUR climbed above 1.3300 against the Dollar and near 0.9100 against the Pound Sterling. The question remains as to whether the 16-nation currency can hold onto these advances throughout the coming week.
Startling news emerged from the Euro-Zone as the European Union (EU) made overtures towards the idea of Iceland joining the union. After its national bankruptcy last year, the small island country has been struggling to catch up.
In economic news, the staggeringly high PMI numbers from the Euro-Zone regional economy generated a strong movement towards the EUR at the end of last week's trading; no doubt adding to the EUR's bullish run. Supporting this bullish momentum was the additional news from the German Ifo Business Climate report which signaled that the Euro-Zone may actually have bottomed and is beginning its steady road to recovery.
With the moderate news week ahead for the EUR, we may see the recent strength continue so long as economic fundamentals produce better than expected results like they did last week. However, the optimism which was soaring high at the end of last week, may have corrected itself downward as the realization of an economy hitting rock bottom sank in. While a good signal that the Euro-Zone is starting its recovery. The long road ahead may indeed stymie this bullish movement. Traders may want to look for a downward-correcting EUR this week.
JPY - JPY's Recent Gains Set to Reverse
The Japanese Yen was set to advance itself throughout this week, after gaining steadily against most of its rivals, especially the USD. However, as the Nikkei index opened lower at the start of this week, the Yen's safe-haven move may have ended abruptly this morning. Growing as high as 96.65 against the USD and 127.50 against the EUR, the Yen may now see a correction throughout the impending hours due to poor stock performance and a USD-positive trading session.
With the recent scare over the swine flu outbreak in the United States, the JPY was bought up as an alternative safe-haven against the USD as tourism in the U.S. was expected to drop. Nevertheless, the JPY now appears to be paring off its recent gains as stock markets indicate a lack of confidence in the Japanese currency. Traders may look to the Yen depreciating against most of its currency rivals throughout the next few days, especially with a heavy news week for the JPY which may illuminate the inherent weakness of the island economy.
Crude Oil - Is OPEC Planning Further Production Cuts?
After failing to breach the resistance level of $52 a barrel last week, the price of Crude Oil appears to be coming back down. Recent press releases from the various oil ministers in member countries of the Organization of Petroleum Exporting Countries (OPEC) have stated that the latest price volatility has been damaging to the future of the oil industry. Such volatile price swings as those seen over the past 8 months can cause irreparable carnage to an industry in need of heavy foreign investment.
Without clear data regarding the current supply and demand levels in the world's energy supplies, organizations such as OPEC have little to go on but recent price levels. If prices don't find strong support in the coming weeks, the cartel may be forced to call for further production cuts in order to boost prices back to levels where investment becomes feasible. If oil prices continue where they are, this move may be more likely. Traders need to keep an eye on hawkish statements such as these from members of OPEC as it could signal a shift towards further production cuts, and the possibility of an increase in the value of Crude Oil.
Article Source - Greenback is Knocked Down by the Swine Flu in Mexico
What is Forex?
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.
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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.
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Good luck to everyone!