US Dollar Rises as Stock Markets, US Index Futures Turn Lower in Asian Trading (Euro Open)

The US Dollar gained against most major currencies as stocks tumbled across Asian exchanges and US equity index futures traded down as much as 1% ahead of the opening bell in London. Overnight data saw New Zealand’s input PPI fell the most since 1976 in the first quarter while Japanese consumer confidence beat economists’ expectations in April.

Key Overnight Developments

• New Zealand's Producer Input Prices Fell Most Since 1976 in Q1
• Japanese Consumer Confidence Beat Expectations in April

Critical Levels

The Euro trended lower, shedding as much as 0.5% against the US Dollar. The British Pound followed suit, testing as low as 1.5117 to the greenback.

Asia Session Highlights

New Zealand Producer Input Prices tumbled -2.5% in the first quarter, the most since records began in 1976, as falling commodity prices drove down production costs. Output prices, the costs paid to manufacturers by re-sellers of finished goods, also fell by a record -1.4%. The metrics came in substantially below economists’ expectations: forecasts had called for input prices to remain unchanged and for output prices to gain 0.5%. The data suggests continued downward pressure on consumer prices, the headline inflation gauge, as a slimmer manufacturing bill translates into lower final price tags. Easing inflation will give the Reserve Bank of New Zealand substantial room to follow through on recent statements arguing that it is “appropriate to provide further policy stimulus to the economy [and keep interest rates] at or below the current level through until the latter part of 2010.”

Japan’s Consumer Confidence registered better than economists expected in April, rising to 33.2 from 29.6 in the previous month. The rise was foreshadowed by a similar result in April’s Eco Watchers survey. As with that reading, the reading remained below the 50 “boom-bust” level, suggesting consumers’ outlook continued to deteriorate, albeit at a slower pace. Rising stock prices and a robust government stimulus plan may have helped boost sentiment: the Nikkei has rallied 18.4% over the past two months; meanwhile, Prime Minister Taro Aso has pushed through a record-large spending package. Looking ahead, lackluster overseas sales are likely to keep a tight lid on industrial output levels, weighing on employment and discouraging spending. Indeed, the International Monetary Fund (IMF) has forecast that global trade volume (including both goods and services) will shrink by a whopping -11% this year and add just 0.6% in 2010.

Euro Session: What to Expect

The Euro Zone Trade Balance report is expected to show a deficit of -0.3 billion euro in March, a narrowest monthly shortfall since June 2008. However, the reading is unlikely to be seen as encouraging as the headline figure would suggest considering the improvement will probably owe to falling imports rather than robust cross-border sales, underscoring acute weakness in employment and lackluster consumer spending. Indeed, the latest industrial production data saw output fell by the most on record as the global economic downturn weighed on overseas demand.

On balance, risk trends are likely to guide price action in European hours. Stocks tumbled across Asian exchanges and US equity index futures traded down as much as 1% ahead of the opening bell in London. This hints that risk aversion is creeping back into the market, boosting the safety-linked US Dollar and Japanese Yen.

Written by Ilya Spivak, Currency Analyst
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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.

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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.

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Good luck to everyone!