5.08.2009

US Dollar Range-Bound Against Euro, British Pound Ahead of US Jobs Report (Euro Open)

Key Overnight Developments

• RBA Concedes Recession in 2009 But Retains Optimistic Outlook
• Bank of Japan May Expand Current Quantitative Easing Programs

Critical Levels

The Euro oscillated in familiar territory in overnight trading, oscillating in above 1.3350. The British Pound followed suit, trading sideways in a well-defined 100-pip range below 1.5050.

Asia Session Highlights

The Reserve Bank of Australia’s Quarterly Monetary Policy Statement saw policymakers concede that the economy will see the first recession since 1991 this year, with gross output shrinking -1.25% in the 12 months through June. Still, the bank echoed optimism from the last interest rate announcement, saying Australia will perform better than most other developed countries amid the current downturn and expressing confidence that existing monetary and fiscal measures will help support demand in the period ahead. To that effect, Glenn Stevens and company asserted that it was “appropriate to make smaller and less frequent adjustments to [interest rates having seen] some signs of stabilization in the world economy."

Minutes from the last policy meeting of the Bank of Japan revealed that policymakers may expand current lending programs to assure credit access for companies. The BOJ cut benchmark interest rates to a mere 0.1% in December and has been actively buying corporate and government bonds from banks to boost those institutions’ capital available for lending. For the time being, members were content to broaden the range of assets that would be acceptable as collateral to further ease access to borrowing. However, Maasaki Shirakawa and company did not rule out “additional measures” if conditions become more severe.

Euro Session: What to Expect



Switzerland’s Unemployment Rate is expected to tick higher in April, rising to a 3-year high at 3.5%. Job losses will trim disposable incomes for those out of work and encourage precautionary saving for those that are still employed, weighing on spending. Private consumption is the largest component of GDP, so turmoil in the labor market is likely to keep a lid on economic growth. The central bank has committed to aggressive monetary stimulus: interest rates stand at just 0.25%, quantitative easing measures are in place, and the policymakers are committed to keep down the value of the Swiss Franc in a bid to prevent deflation. Still, the annual pace of inflation printed in negative territory for the second consecutive month in April and a survey of forecasters conducted by Bloomberg expects the mountain nation’s economy will shrink by 1% this year.

In Germany, the Trade Balance surplus is expected to narrow to 8 billion euro in March, down from 8.7 billion in the previous month. This would amount to a whopping -51.8% drop in trading terms from a year before on as deepening global recession weighed on overseas demand for German manufactured goods. Lackluster sales have seen firms scale back output and lay off workers. Indeed, Industrial Production is likely to have shed -20.9% in the year to March, the most on record. Rising unemployment has weighed on disposable income and trimmed spending, weighing on economic growth and pushing the economy to shrink by a whopping -4.95% in 2009 according to the latest forecasts collected by Bloomberg.

Written by Ilya Spivak, Currency Analyst
Article Source - US Dollar Range-Bound Against Euro, British Pound Ahead of US Jobs Report (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!