4.15.2009

US Dollar Higher as Stocks Slip in Asian Trading, Fueling Demand for Safety (Euro Open)

The US Dollar gained on demand for safe-haven assets as stocks fell across Asian exchanges. Overnight data saw Westpac forecast that Australian interest rates will head lower in the second half of the year as the economy sinks into recession. Germany’s Wholesale Price Index is on tap in European hours.

Key Overnight Developments

• UK House Prices Improved in March, Says RICS
• Australian Leading Index Drops to Record Low, Signals Recession
• US Dollar Higher as Stocks Slip on US Retail Sales, Higher Yen

Critical Levels



The Euro moved lower in overnight trading, slipping -0.3% to test the bottom of the 1.3230-1.33 range that has confined price action over the past 24 hours. The British Pound also slipped against the greenback, inching deeper below 1.49 to test as low as 1.4858. The US Dollar gained on demand for safe-haven assets as stocks fell across Asian exchanges. Investors hopeful of a US-led rebound in global demand were discouraged by disappointing Retail Sales data while a stronger Yen weighed on export issues.

Asia Session Highlights



UK house prices improved in March according to RICS, a private organization for property sector professionals. The RICS House Price Balance, a survey of real estate agents and surveyors, showed 73% of respondents reported price declines, an improvement over the -78% result registered in February. Today’s result marks the best reading in 13 months. Still, it is important to note that the metric has been trending higher since April of last year even as the credit crisis intensified and the unemployment rate pushed higher, suggesting a substantial lag between higher readings in the RICS balance and visible improvements in consumers’ buying power. To that effect, it would be premature to take today’s reading as indicative of a sustainable rebound in demand for big-ticket items, a development that would be reflective of buyers’ expectations that the economy will improve in the near future. Indeed, consumer confidence matched a record low in March while NIESR, a think tank, said the economy shrank 1.5% in the first quarter and could “continue to decline for up to another year.”

The Westpac Leading Index fell for the sixth consecutive month in February to bring the annual pace of decline to -5.1%, the worst since 1982. Westpac chief economist Bill Evans said the rate of contraction is “truly remarkable”, adding that the index signals “the Australian economy will enter a recession.” Although the Reserve Bank of Australia has signaled it is done cutting interest rates, Evans said the decision to hold off on easing now is likely a tactical one given the confidence boost typically seen after such actions: “We expect the bank will see the need to have ample capacity to be cutting rates through the second half of 2009…The economic case for cutting rates is undeniable.”

Euro Session: What to Expect



Germany’s Wholesale Price Index is expected to shrink for the 8th consecutive month in March, showing the annual pace of decline accelerated to -0.3% from -0.1% in the preceding month. The metric measures the prices retailers pay to producers for finished goods, with continued weakness likely to spill over into consumer inflation as stores pass on lower wholesale costs through discounts on the final price tag. The Consumer Price Index fell to the lowest in a decade in the year to March. Despite tumbling prices and deepening recession across the Euro region, the European Central Bank cut interest rates less than economists expected earlier this month, although bank president Trichet did say that rates had not reached “the lowest limit” and revealed that “the Governing Council intends to decide on further non-standard measures at our next monetary policy meeting”.

Written by Ilya Spivak, Currency Analyst
Article Source - US Dollar Higher as Stocks Slip in Asian Trading, Fueling Demand for Safety (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!