5.27.2009

USD Regains Value Against the Majors

The U.S Consumer Confidence report which was released yesterday, gave a surprisingly positive result, suggesting that the public is retaining its faith in the North-American economy. In today's trading, traders should pay special attention to the Existing Home Sales indicator scheduled for 14:00 GMT, as another positive figure could further strengthen the USD.



USD - Dollar Pairs Gains On Positive Consumer Confidence

The greenback advanced versus all of its major counterparts as signs of improving consumer confidence in the United States combined with worries about Germany's banks hurt the European currency after a rally last week. The Conference Board's U.S. consumer confidence index rose in May to 54.9 from an upwardly revised 40.8 in April. The U.S currency strengthened after a media report questioning the health of the German banking system prompted traders to trim back bets against the Dollar.

In trading just before midday in New York, the Dollar was up 0.2% versus the EUR to $1.3893, after touching a session low of $1.3859. The Dollar also rose against the Japanese Yen, trading at 95.10 Yen compared with 94.77 Yen late Friday. But after the release of the U.S. confidence numbers, the EUR also regained some ground against the Dollar, and was at $1.3984 in late New York trade.

The Dollar traded at 5 month lows last week, pushed lower in part by concerns that soaring deficits may threaten the United States' 'AAA' sovereign debt rating. However, the Dollar would likely hold its value even if the U.S. lost its AAA credit rating, because demand for government securities among foreign central banks is unlikely to wane, according to analysts.

Another round of important economic data from U.S is ahead, the Existing Home Sales. The indicator will be published on Wednesday at 14:00 GMT, and is expected to rise from 4.57 million to 4.65 million. A good figure could help the Dollar with retracting its last month's falls against the EUR.

EUR - EUR Hit by Concerns over German banking sector

The European currency depreciated for the first time in 7 days, eroding advances that pushed it last week to the highest level in 4 months. The 16-nation currency fell against the Dollar on speculation last week's gain was too large to sustain, reducing the currency's appeal. The EUR dropped 0.2% to $1.3982 from $1.4017 yesterday. It touched $1.4051 on May 22, the highest level since Jan. 2. Against the Yen, the EUR traded at 132.87, compared with 132.92 yesterday.

The Euro-Zone currency was hurt by plummeting share prices and weak economic data. A media report questioning the health of the German banking system also prompted traders to cash in on the EUR's recent rally. EUR's depreciation versus the Dollar came after the report over Germany's debt situation. Although not new, the report warned that German banks have bad assets of around 200 billion euros ($280 billion).
However, according to technical analysis the EUR may advance further versus the Dollar after the 50-day moving average rose above the 200- day average for the first time since September. The EUR 50-day moving average, currently at $1.3409, surpassed the 200-day moving average at $1.3385 today. Both are good bullish signals analysts say.

JPY - Yen Down Versus the U.S Dollar

The Japanese yen weakened as U.S. economic reports added to evidence the start of a recovery is near, reducing demand for safety. The JPY fell against 15 of the 16 most-active currencies after data showed U.S. consumer confidence climbed this month to the highest since September.
The JPY held declines against the Dollar after a government report showed the world's second-largest economy unexpectedly posted a trade surplus in April. The Yen bought 95.36 versus the dollar from 95.03. The Yen declined to 133.34 per EUR from 132.90 yesterday.

Oil - Crude Rallies on U.S Consumer Confidence

Crude Oil prices rose as much as 0.8%, to $62.35 a barrel, its highest settlement in more than 6 months in New York yesterday as U.S. benchmark stock indexes climbed for the first time in 5 sessions. Crude extended its gains after rising yesterday as a report showing a jump in U.S. consumer confidence triggered an advance in equities. The biggest gain in consumer confidence since 2003 spurred optimism the worst of the recession is over in the world's largest oil-consuming nation.
Oil was falling earlier in the session on expectations that the Organization of Petroleum Exporting Countries (OPEC) won't cut production quotas at a Thursday meeting. OPEC raised its oil production in April for the first month since September, as some member countries took advantage of a recent rally in oil prices, data from the International Energy Agency showed.
OPEC, responsible for 40% of global crude supply, is likely to keep output quotas unchanged for a second time this year as recovering oil prices forestall the need for new cuts, according to analysts.

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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!