U.S. Employment and Housing Data to Lead Today's Market

The beginning of a new month always precedes 2 important events in the forex market: the release of immensely important U.S. economic data and an influx of trading after workers receive monthly salaries. Kicking off the month of April today, traders will notice a large portion of economic news coming from the States; particularly regarding housing, employment, inflation, and the ever-increasingly important Crude Oil inventories report. If you were waiting for the right day to begin trading forex, that day has come.

USD - USD Viewed as World's Dominant Currency

The U.S. currency was lower against most major currencies Tuesday, ahead of this week's Group of 20 nations (G20) meeting. Analysts said that worries about the financial sector and signs of rising tensions ahead of tomorrows meeting of world leaders would likely limit downslide potential for the USD. Still the Dollar's outlook remains strong and stable against the majors, despite the ongoing deluge of negative U.S. economic data.

Analysts stated that the market has started to focus on this upcoming summit of major industrialized economies in London on Thursday, with investors hoping for agreement on measures to revive the global economy. Meanwhile the U.S currency rallied to a 3-week high against the Japanese Yen to as much as 99.36 Yen. The Dollar rose more than 2% against the JPY, as weak economic data and year-end prompted Japanese investors to bring money home, reversed course as traders closed the books on the fiscal year.

The World Bank president said on Tuesday that the Dollar is likely to remain the world's dominant reserve currency and a strong U.S. currency is a key to lifting the world out of economic and financial crisis. Given the important role the U.S. Dollar plays in the global financial system, it is incumbent upon the United States to pursue sound economic, fiscal and monetary policies.

EUR - EUR under Pressure Ahead of ECB Decision

The European currency pared gains slightly against the USD on Tuesday after data showed U.S. home prices plunged a record 19% in January from a year earlier, suggesting U.S housing remains in a deep recession. Against the Dollar, the EUR firmed 0.7% to 1.3292. Analysts believe the EUR's gains may be limited, however, as investors look ahead to Thursday's European Central Bank (ECB) interest rate decision. The EUR may decline against the Dollar as economists estimate that the ECB will lower rates to 1% at this month's meeting. The EUR did rise, however, against the JPY, advancing 1.5% to 130.20 Yen.

The ECB is forecast to cut rates by 50 basis points with the possibility that it will follow other major central banks and adopt other unconventional measures to boost money supply. Yesterday's fundamental data showed that Euro-Zone inflation plunged to an all time low of 0.6% year-on-year in March, strengthening the case for a deep interest rate cut. The inflation data underlines that the Euro-Zone is as much a victim of the current crisis as the U.S. and the UK and the ECB will be forced to adopt more aggressive measures, analysts have said.

Moreover, the Organization for Economic Cooperation and Development (OECD) forecasted this Tuesday that the European economy would shrink 4.1% this year and a further 0.3% in 2010; the most pessimistic outlook of all institutional forecasters thus far.

JPY - Yen Reverses its Earlier Losses on Auto Bankruptcy Fears

The Yen strengthened on speculation President Barack Obama will let U.S. automakers go bankrupt, reviving demand for the Japanese currency as a refuge from the global financial crisis. The Yen advanced to 98.67 versus the USD from as low as 99.47 earlier and from 98.96 yesterday. Japan's currency also strengthened to 130.43 per EUR from as low as 131.89 earlier and from 131.13.

Yesterday, however, was not a very successful day for the Japanese currency. The Yen slid on a surge in Japanese investors' demand for foreign currencies on the last day of Japan's financial year. The JPY fell against the Dollar, extending its worst quarterly loss since 2001, after a Bank of Japan (BoJ) survey showed business sentiment dropped the most on record, reducing demand for the currency. The Yen also weakened versus the EUR after reports this week showed factory output dropped for a 5th month and the unemployment rate climbed to the highest in 3 years.

Crude Oil - Crude Oil Fails to Break $50

Crude Oil prices fell below $49 a barrel on speculation that a government report will show U.S. inventories rose from the highest level in more than 15 years. Crude earlier rose Tuesday, extending its monthly gains to nearly 11% as rising stock markets helped boost investment sentiment while a weakening greenback increased Dollar-denominated commodity prices. The Energy Department is scheduled to release its weekly supply update at 14:30 GMT. The report is forecast to show that inventories of gasoline and distillate fuel, a category that includes heating oil and diesel, dropped. Oil prices rose $1.25, or 2.6%, yesterday to $49.66 a barrel as equities increased and a weaker Dollar enhanced the appeal of commodities.

The Organization of Petroleum Exporting Countries (OPEC) and the U.S. Energy Department cut their 2009 forecast for oil demand this month. They expect consumption to slump by more than 1 million barrels a day this year. Crude Oil supplies have increased as OPEC agreed on March 15th to keep output quotas unchanged, saying members have to cut a further 800,000 barrels a day to comply with existing targets. OPEC is next scheduled to meet on May 28th in Vienna.

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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.


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!