4.14.2009

US Dollar May Fall as Goldman Earnings, Japan Stimulus Boost European Stocks (Euro Open)

The US Dollar may see selling pressure in European hours as stock exchanges open for the first time since last week and investors price in Japan’s third stimulus package as well as news that first-quarter earnings at banking giant Goldman Sachs more than doubled expectations.

Key Overnight Developments

• New Zealand Retail Sales Unexpectedly Rise in February
• Australian Business Confidence Improved in March, Says NAB
• BOJ’s Shirakawa Skeptical About Signs Economy is Rebounding
• Euro Corrects Lower, British Pound Range-Bound Against USD

Critical Levels



The Euro corrected downward in overnight trading after an impressive rally in New York hours, testing as low as 1.3306 to the US Dollar. The British Pound traded sideways in a choppy, 40-pip range above 1.4830.

Asia Session Highlights



New Zealand Retail Sales unexpectedly rose in February, adding 0.2% from the previous month. The improvement may mean that consumers are starting to respond as the central bank brought borrowing costs to a record-low 3.00% while the government cut income taxes on those earning over NZ$42k per year. Ample room for skepticism remains, however, as rising unemployment weighs on disposable incomes and discourages spending. Further, a rebound in oil prices may also explain the uptick: fuel sales led gainers in February, rising 6.7%; meanwhile, crude rose for the first in seven months during the same period, rising 7.2%. New Zealand’s retail sales data is not adjusted for price changes, suggesting the improvement in the headline figure may be reflective of higher petrol costs rather than a rebound in consumer sentiment. Indeed, core retail sales (which exclude fuel sales) declined -0.1%.

In Australia, NAB Business Confidence rose for the second consecutive month to print at -13 in March from -22 in the previous period. NAB chief economist Alan Oster remained cautious, saying, “While an element of fear appears to be abating, the index is still quite low [and] points to falling demand in the first quarter.” The measure is based on a survey of around 350 small- to medium-sized firms, with a negative reading showing pessimists continue to outnumber optimists among respondents.

Bank of Japan Governor Maasaki Shirakawa said he was “cautious” about the initial signs that the current economic downturn was stabilizing in a speech to a parliamentary committee in Tokyo. The bank chief noted that, “While drops in exports and output are easing, we expect business investment and consumer spending to keep weakening and become major factors that will drag down growth.”

Euro Session: What to Expect




With no substantial, market-moving data on the economic calendar, price action is likely to fall in with risk trends in the forthcoming session. European stock exchanges have been closed since last week, opening the door for a move higher as traders price in announcements of Japan’s third stimulus package as well as news that first-quarter earnings at US investment banking giant Goldman Sachs more than doubled expectations. Stock market gains could weigh on the US Dollar: the greenback remains over -90% inversely correlated with the MSCI World Stock Index.

Written by Ilya Spivak, Currency Analyst
Article Source - US Dollar May Fall as Goldman Earnings, Japan Stimulus Boost European Stocks (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!