USD - Dollar Goes Volatile on U.S. Banking Worries
The Dollar experienced a very volatile day of trading on Wednesday as a number of different factors helped determine the closing rate of the Dollar versus its main currency crosses. The main factor that helped determine the greenback's strength in yesterday's trading was the banking worries led by Morgan Stanley and Wells Fargo. This came about despite the Dow Jones rallying earlier in the day. This came to people's dismay as Morgan Stanley produced positive figures in the previous quarter and the U.S. housing market posted some impressive figures on Wednesday.
The Dollar rose by a massive 160 points versus the British Pound, as investors dropped the GBP and put their money into equities rather than gamble on the Pound Sterling. The pair ended down at the 144.60 level. Against the JPY the USD slid by 50 points to 97.62, as traders responded positively to the recommendation by major banks of the positive Japanese financial sector, and that the worst of the economic decline in Japan may be over. The Dollar fell by 40 points to 1.2992 versus the EUR, as Europe's financial sector edged higher yesterday. This marks an end to the EUR's losing streak against the USD.
Looking ahead to today, we may see a strong Dollar as Britain and Europe react negatively to the late negative financial news that came out of the U.S. yesterday, as toxic debt and banking liabilities from the banking sector reach the forefront again. Britain and the Euro-Zone have been very susceptible to negative financial news coming out of the U.S. since the start of the financial crisis. There are a number of economic data releases that may help determine the Dollar's value later today. The 2 most important of these are U.S. Unemployment Claims at 12:30 GMT and Existing Home Sales at 14:00 GMT. If the economy continues showing bearish figures, the USD may respond in kind.
EUR - Pound Slumps as Financials Climb
The Pound dropped as Britain and European Banks climbed in yesterday's trading session. The FTSE, DAX and CAC 40's gains were led by the top financial institutions. The most notable increases were held by the major British and European banks, including HSBC, Barclays, Lloyds, and Deutsche Bank. This was partially owed to helpful words from U.S. Treasury Secretary Timothy Geithner. However, on the negative side for the Pound was the gloomy budget released by Britain's Chancellor of the Exchequer Alistair Darling. This comes about as he revealed that income taxes will increase, government spending will swell, and Britain's debt will climb.
As a result of the slump in the British economy, and traders opting to drop the Pound for the equities market, the Pound made terrible losses in Wednesday's trading. The British currency fell by a massive 230 points versus the Japanese currency to close at 141.26. Against the EUR, the Pound plummeted by 150 points as the EUR/GBP started to move higher again resulting from the Euro-Zone economy showing some positive economic advances. The GBP/USD pair finished lower by over 230 points at 141.21, as traders fear the mounting debt of the British economy and prefer the safe-haven U.S. Dollar.
Today, the Pound is likely to continue to deteriorate as Britain reacts to the banking worries from the U.S. The most significant data release from Britain later today will be the CBI Industrial Order Expectations at 10:00 GMT. The British currency is also likely to react to the other spattering of news events coming out of the Euro-Zone and the U.S. These include various manufacturing data from France and Germany, and U.S. Existing Home Sales later in the afternoon. The Pound's currency crosses are also likely to be determined by unexpected speeches by U.S. Treasury Secretary Timothy Geithner and British Prime Minister Gordon Brown later today.
JPY - Yen Climbs against Majors
The Yen rose against most of its major currency pairs in yesterday's trading, as the JPY's safe-haven status returns to the forefront. The Yen's gain against the Dollar in late trading is largely owed to fears that the stress tests for U.S. banks from the Obama administration are likely to reveal great losses in the U.S. banking sector. The USD/JPY currency pair finished lower by 50 points at 97.62. The JPY also made some impressive gains against the Pound to close up by over 230 points at 141.21. This comes about before a report showing that the British economy shrank for the 3rd successive quarter. However, the Yen fell by 10 points against the EUR to close at 126.91.
The Yen seems to be trading on unsteady ground as uncertainty in the financial world reappears on center stage. Just as things seemed to be improving, the Obama administration has set new hurdles for U.S. banks, which is likely to reveal further losses. However, this is likely to show pessimism in the second largest economy. When it comes to the forex market, however, the Yen is likely to benefit from its safe-haven status. This will in-turn go against the Japanese government and Bank of Japan (BoJ) as they desire a weak Yen in order to increase exports and recover from the current financial crisis relatively faster.
Crude Oil - Crude Oil Prices Stable near $48.50
The price of Crude Oil slipped slightly as U.S. Crude Oil Inventories rose higher than expected. The price of the black gold slid by 30 points to $48.43 a barrel. Crude Oil didn't slide as much as people thought it would following the release of this important data, as stock markets across the globe made some gains, thus spurring equities and commodities upwards. Crude Oil seems to have reached its equilibrium as prices have not slipped below the $48 mark in more than 3 weeks.
In order to see a vast improvement in Crude prices in the coming weeks, we will need to see a string of positive economic data releases from the world's leading economies. Truth be said though, a full-fledged global economic recovery is unlikely to occur before the middle of 2010. However, in the short-medium there is some leeway for the price of oil to hit $60 a barrel, provided demand can support this price.
Article Source - Traders Anticipate Heavy News Day in Forex
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.
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.
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!