6.25.2009

US Dollar Threatened as Asian Stocks, US Index Futures See Rising Risk Appetite (Euro Open)

The US Dollar may see near-term selling pressure ahead as Asian shares surged 2% and US index futures rose 1% ahead of the opening bell in Europe after an unexpected improvement in US Durable Orders, boosting risk appetite.

Key Overnight Developments

• NZ Current Account Deficit Shrinks as Imports Tumble 21.9%
• US Dollar Trades Lower as Stocks Rise on US Durable Goods Data

Critical Levels



The Euro crept higher in the overnight session, adding 0.4% against the US Dollar. The British Pound followed suit, testing as high as 1.6468 against the greenback. The Dollar backed off after gaining substantially in US hours as stocks surged in Asian trading, boosted by an unexpected improvement in US Durable Orders that weighed on demand for safe-haven assets.

Asia Session Highlights



New Zealand’s Current Account deficit shrank in the first quarter, revealing a shortfall of –NZ$1.25 billion versus –NZ$4.06 recorded in the three months to December 2008. However, the improvement in the headline figure is hardly encouraging, owing to a -21.9% decline in imports rather than any rebound in foreign demand. The metric paints a picture of weak domestic demand and seems all the more ominous in the context of a 1.1% currency appreciation during the reporting period which would reasonably be expected to boost New Zealanders’ purchasing power of foreign goods. Private consumption accounts for 62.3% of overall economic growth and continued weakness in domestic spending makes it unlikely that the smaller antipodean nation can mount a meaningful recovery from the current downturn in the near term. Indeed, tomorrow’s GDP report is expected to show that the economy contracted for the fifth consecutive quarter, shrinking -0.7% in the three months to March.

Euro Session: What to Expect



An uneventful economic calendar is likely to yield to risk trends as the primary driver of forex price action in European trading hours. Where these trends will lead the major currencies in the very near term looks uncertain, however, as traders resolve the balance between the impact of an unexpected improvement in US Durable Orders and the dovish FOMC policy announcement. The Asian session seemed to favor the former catalyst, pushing stock prices higher and modestly weighing on the US Dollar. The same looks likely going forward with US equity index futures implying the Dow Jones and S&P 500 will open over 1% higher on Thursday, hinting at a healthy appetite for risk-taking across financial markets. That said, a downward revision in tomorrow’s final update to US first-quarter GDP figures may amplify the Fed’s cautious tone, supporting demand for safe-haven assets and boosting the greenback.

Written by Ilya Spivak, Currency Analyst
Article Source - US Dollar Threatened as Asian Stocks, US Index Futures See Rising Risk Appetite (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!