5.15.2009

Oil Goes Bullish on Weak Dollar

Oil prices reached over $59.50 a barrel yesterday, an increase of a whopping 4%. It seems that the OPEC production cuts have worked. Traders should also take into account that the Crude prices were also fueled yesterday by bullish stock markets and a weak Dollar. The price of Crude Oil is only likely to increase further today if the U.S. and Euro-Zone continue to show optimism, and the Dollar continues its bearish run.



USD - Dollar Plummets on Jobless Claims Data

The U.S. Dollar plummeted considerably versus its major rivals on Thursday. This was amid uncertainty about the economic outlook, buoyed by modest safe-haven flows. The Dollar dived against the EU after a report showing U.S. jobless claims rose last week more than analysts originally forecasted. However, the U.S. and global stock markets made gains yesterday.

The USD fell by over 80 pips to 1.3634 against the EUR yesterday, after appreciating earlier to $1.3531, the strongest level since May 8. The Dollar also declined against the GBP by 110 pips to close at 1.5229. The U.S. currency, however, increased against the JPY to 95.99 Yen from a 95.47 opening. The Dollar has weakened in the past 3 weeks, falling to $1.3634 per EUR from $1.2886 on April 22, while the Standard & Poor's 500 Index reached its high for the year and Treasury yields rose amid an increase in risk appetite among investors.

The U.S. Dollar may appreciate further against the EUR after the 16-nation currency was unable to break above $1.3700 amid an increase in U.S. stocks. Stock markets remain a key driver of currencies, and their rise in yesterday's trading was clearly reflected in the bearishness of the Dollar, analysts said. Market players will be watching a heavy round of U.S. economic data on Friday, including April consumer price inflation, the University of Michigan consumer confidence survey.

EUR - The Euro-Zone Goes Defensive on ECB Policy Concerns

The EUR held on to gains made on Thursday against the greenback keeping within sight of recent highs made as optimism has grown that the worst of the global economic crisis may be over. The European currency, which hit a 7 week high at $1.3722 this week, was a shade softer at $1.3624 in early trading on Friday.

Against the Yen, the EUR headed for its first gain in 3 days on speculation the European Central Bank (ECB) will take additional steps to keep down borrowing costs, possibly increasing demand for the currency. The EUR/JPY currency pair finished trading at 130.92 Yen from 129.42 Yen yesterday. Traders now wonder if the EUR can extend this 1 day gain against the JPY.

The market offered limited initial reaction to comments by members of the European Central Bank Governing Council, who on Thursday stated the ECB's key rate may eventually approach zero. Some analysts said recent comments from the ECB underlined disagreement between policymakers regarding how much lower Interest Rates can fall, and if this disagreement continues the result may be a bearish EUR in the medium-term.

The Pound Sterling remained under pressure after the Bank of England (BoE) said on Wednesday that it expected British inflation and the economy to recover more slowly than previously forecast. The Pound made impressive gains against the Dollar on Thursday to finish higher by over 100 pips at 1.5229. Today, investors have their eye on German Prelim GDP figures at 6.00 GMT, as this is likely to lead to volatility in the EUR/GBP cross.

JPY - The Yen Declines vs. the USD as Stocks Rebound

The Yen fell against the EUR for the first time in 4 days as a gain in stocks encouraged investors to buy higher-yielding assets funded with Japan's currency.
The JPY declined by over 1% against the EUR to 130.92 from 129.42 yesterday .The Yen also weakened earlier 1% against the Dollar to 95.99, because of selling to protect options that would become worthless should Japan's currency rise further, according to analysts.

The Yen may reverse this year's decline against the Dollar as Japan's currency succeeds the greenback as the best refuge from the financial crisis. The Japanese currency may appreciate to 92 yen by the end of the year as the link between the greenback and risk aversion deteriorates. As for today, forex traders are advised to follow the U.S. Core CPI data release at 12.30 GMT, as the results of this are highly likely to determine USD/JPY trading going into next week.

Crude Oil - Crude Rises Above $59 a Barrel

Crude Oil prices rose on Thursday, tracking a rebound on Wall Street, though a gloomy demand forecast from the International Energy Agency (IEA) limited gains.
Crude prices rose $2, or 4%, to settle at $59.53 a barrel. Oil prices continue to track equities markets as traders look to stocks for signs of an economic recovery that could lift ailing world fuel demand. The other factor that helped Oil prices yesterday was the weak Dollar, directly leading to a bullish price of Oil.

The 11 members of the Organization of Petroleum Exporting Countries (OPEC) bound by production targets implemented 77% of planned cuts of 4.2 million barrels a day in April, down from a revised 82% for March. The cartel next meets on May 28, and is unlikely to alter production limits if prices remain strong, Iraq's oil minister said Thursday. The price of Crude may hit $65 by the end of the month if additional solid signs of an earlier-than-forecasted economic recovery become more apparent.

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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!