6.12.2009

US Dollar Looks Past Stock Markets to Advance in Asian Trading (Euro Open)

The US Dollar shrugged off gains across Asian stock exchanges, with the typically safety-linked currency advancing 0.4% against top counterparts. Overnight data saw New Zealand’s Retail Sales beat expectations while Japan’s Consumer Confidence rose for the fifth consecutive month in May.

Key Overnight Developments

• NZ Retail Sales Top Expectations as Currency Boosts Auto Receipts
• Japanese Consumer Confidence Top Forecasts But Outlook Remains Bleak

Critical Levels



The Euro trended slightly downward in overnight trading, testing as low as 1.4069 to the US Dollar. The British Pound sold off more aggressively, slipping as low as -0.4% to the greenback. Rising stock markets failed to hold back the US unit in Asian trading, with the Dollar Index 0.4% higher ahead of the opening bell in Europe.

Asia Session Highlights



New Zealand Retail Sales trumped expectations in April, rising 0.5% following a -0.4% decline in the previous month. Economists had forecast a 0.2% result ahead of the release. Interestingly, retail receipts excluding auto sales actually fell -0.1%, a result substantially worse than the 0.4% expected. The discrepancy may be accounted for by currency appreciation: a trade-weighted index tracking the average value of the Kiwi dollar advanced 12.3% in March, suggesting that by April foreign-made goods were comparatively cheaper in terms of the local currency; vehicles and machinery top the list of commodities imported by New Zealand, and auto sales clearly showed to be the make-or-break sector taking retail activity into positive territory. On balance, suggests the strength in the headline figure does not reveal much underlying improvement in consumer sentiment. Indeed, standing labor market forecasts make any meaningful recovery in confidence unlikely: the Reserve Bank of New Zealand expects the jobless rate to hit 5% this year and top 7% in 2010, weighing on disposable incomes and darkening the outlook for the retail sector.

Japanese Consumer Confidence advanced for the fifth consecutive month in May, rising to 36.3 from 33.2 in the previous month. Although the metric has advanced nearly 30% since setting a record low in December of last year, it remains below the 50 mid-point level, suggesting consumers’ outlook remains sour albeit less so than in the recent past. The improvement likely owes to the government’s record-setting $25 trillion yen stimulus package as well as the rebound in share prices. Indeed, the Nikkei benchmark index has surged 44.3% to date since early March. Looking ahead, the outlook for consumer sentiment looks shaky at best: the dismal outlook for global trade volumes in 2009 and 2010 will mean that a robust recovery for the export-dependent Japan will remain elusive for the time being, leaving output and employment levels at the lower end of the spectrum. Indeed, the current account surplus shrank more than expected in April as overseas sales tumbled -40.6%. Lower wages will trim disposable incomes and weigh on confidence

Euro Session: What to Expect



The economic calendar looks fairly uneventful in European hours, with most of the outcomes of most releases reflecting themes that have already been priced into exchange rates. On the inflation front, Germany’s Wholesale Price Index is set to shrink -9.0% in the year to May, the largest decline on record; meanwhile, France’s Consumer Price Index is set to dip into negative territory with a print at -0.2% for the annualized metric. German and Italian consumer inflation also turned weaker, with the former coming to a standstill and the latter dropping to a record-low 0.8% in the year to May. Such outcomes hammer home the fact that the Euro Zone now faces a credible deflationary threat, arguing for a far more forceful monetary response than anything that has been introduced by the European Central Bank thus far. Overnight index swaps suggest that traders are pricing in virtually no chance that the ECB will lower rates at the next policy meeting and quantitative easing will be difficult to expand beyond the modest measures announced earlier this month given the internal conflict about such policies within the central bank. On balance, the currency bloc is looking increasingly vulnerable to slipping into prolonged stagnation as entrenched expectations of lower prices see consumers and businesses hold off on spending and investment as they perpetually wait for the best possible bargain.

Separately, Euro Zone Industrial Production is set to contract for the eighth consecutive month in April, shedding -0.4%. Although the decline is markedly smaller than anything seen in recent months, some moderation is to be expected as companies restock depleted inventories. Global demand remains extremely fragile and output is likely to remain at subdued levels in the months ahead.

Written by Ilya Spivak, Currency Analyst
Article Source - US Dollar Looks Past Stock Markets to 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!