4.03.2009

US Dollar Consolidates Losses, Looks to Non Farm Payrolls for Direction Cues (Euro Open)

The US dollar traded sideways in a narrowing range in overnight hours as the markets consolidated yesterday’s intense swings following the G20 summit in London. Swiss Consumer Prices are on tap overnight, though traders are likely to look past the European data docket to focus on the US Non Farm Payrolls report due late into the session.

Key Overnight Developments

• US Dollar Consolidates Losses After G20 Boosts Risk Appetite
• Australian Service-Sector Sentiment Rebounds From Record Low

Critical Levels



The Euro traded sideways in a choppy range above 1.3425 while the British Pound oscillated in a 70-pip band above 1.47.

Asia Session Highlights



Australia’s AiG Performance of Service Index showed service-sector confidence rebounded to 35.6 in March from a record low at 32.2 in the preceding month. Importantly, the index remained below the boom-bust 50 level, suggesting activity is still shrinking but at a marginally slower pace.

With no substantial data on the economic calendar, the markets consolidated yesterday’s intense swings in overnight trading. The US Dollar traded sideways in a narrowing range having slipped -1.6% against the major currencies as risk appetite surged on seemingly promising news from the G20 summit in London, weighing on the safe-haven asset du jour.

Euro Session: What to Expect



Switzerland’s Consumer Price Index is expected to show that annual inflation has dipped into negative territory for the first time in 5 years to print at -0.1% in the year to March. Although the central bank had previously committed to a very aggressively dovish stance including quantitative easing and currency market intervention, the latter part of the plan may now be off the table considering commitments made at yesterday’s G20 summit in London. A survey of economists conducted by Bloomberg suggests that the economy will shrink -2.5% this year, the most since 1975. The downturn looks certain to weigh on prices further, threatening to foster entrenched expectation of deflation. This threatens to magnify downward pressure on economic growth as consumers and businesses perpetually put off spending and investment to wait for the best possible bargain, sinking the economy into long-term recession.

On balance, price action is likely to look past the European data docket to focus on the US Non Farm Payrolls report due late into the session. Expectations call for the world’s largest consumer market to shed 660k jobs in March, threatening to crush buoyant risk appetite boosted by the lofty promises of G20 leaders, helping the US Dollar higher at the expense of most major currencies.

Written by Ilya Spivak, Currency Analyst
Article Source - US Dollar Consolidates Losses, Looks to Non Farm Payrolls for Direction Cues (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!