5.19.2009

US Dollar Extends Losses as Stocks Advance in Asian Trading (Euro Open)

The US Dollar slipped as much -0.3% in overnight trading as Asian stock exchanges followed Wall St higher with the MSCI Asia index adding 2.75% ahead of the opening bell in Europe. The UK Consumer Price Index as well as the ZEW Survey of investor confidence for Germany and the Euro Zone are on tap ahead.

Key Overnight Developments

• Meeting Minutes Show RBA Sees Stimulus, China Will Support Demand
• US Dollar Declines as Stocks Add Nearly 3% in Asian Trading

Critical Levels



The Euro extended gains in overnight trading, testing as high as 1.3579 against the US Dollar. The British Pound oscillated in a choppy 50-pip range below 1.5350. Broadly, the US Dollar slipped as much -0.3% as Asian stock exchanges followed Wall St higher with the MSCI Asia index adding 2.75% ahead of the opening bell in Europe.

Asia Session Highlights



Minutes from the last meeting of the Reserve Bank of Australia echoed policymakers’ initial optimism, noting signs that “the economic stimulus that had been applied was supporting demand.” The decision to hold rates was not uncontested, however, and some RBA members did suggest that “monetary policy could be eased further at this stage.” The Reserve Bank also reiterated their view that resurgent demand in China will boost Australia’s export sector and bolster the economy, though some on the policy-setting Board questioned the sustainability of such developments if the boost comes from the Beijing government’s stockpiling of coal and iron ore rather than recovering private-sector demand. Australian Secretary to the Treasury Ken Henry also touted the government’s action in a separate speech, saying the unemployment rate could have reached as high as 10% without the government's spending initiative. Separately, RBA Governor Glenn Stevens said in a speech in Sydney that Australia and Canada will emerge “in reasonable shape” from the global downturn.

Euro Session: What to Expect



The UK Consumer Price Index is expected to see the annual pace of inflation slowed to 2.4% in April, the lowest since January 2008. Last week, the Bank of England’s quarterly inflation report revealed that policymakers expect inflation to remain below the target 2% until 2012 as the economy takes a slow path to recovery from the current downturn. The British Pound dropped sharply on the announcement, suggesting the fallout in price growth may already be priced into the exchange rate. That said, the Pound did see buying interest in as stock markets rebounded in New York hours to gain 1.1% against the US Dollar and tonight’s release could serve to undermine the sustainability of the upswing by shifting the focus from risk trends back to economic fundamentals.

Germany’s ZEW Survey of investor confidence is expected to print at the highest level in nearly 2 years in May, rising to 20 from 13 in the previous month. However, improvements in the metric are unlikely to offer much near-term support to the single currency: the ZEW reflects the forward-looking perspective of the survey respondents, meaning the reading tends to lead the Euro by a significant margin such that the trend in the Expectations component inverts major tops and bottoms in the exchange rate. Specifically, the ZEW began to trend lower in the beginning of 2006 and bottomed out in July of last year; the same end-points mark the beginning of the last major uptrend in EURUSD that saw the pair test record highs above 1.60. If the same dynamic is to continue to hold, traders can expect the European unit to set a bottom as the ZEW tops out, a scenario that seems unlikely for the time being considering how much ground remains to be covered before the economy regains its footing.

Written by Ilya Spivak, Currency Analyst
Article Source - US Dollar Extends Losses as Stocks Advance in Asian Trading (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!