6.03.2009

U.S Economy Awaits ADP Non Farm Employment Figures

The Dollar continued its freefall against all the major currencies despite positive housing data figures from yesterday. Today, at 12:15 GMT, Forex traders will have the ability to enjoy hefty volatility in the market as the ADP Non-Farm Employment Change will be released.



USD - ADP Non Farm Employment Report on Tap - Will USD Weakness Continue?

The dollar dropped against most of its major currency rivals yesterday, as strong U.S. housing sales data reinforced optimism about the health of the global economy, sapping safe-haven demand for the greenback. All good news aside, by yesterday's close, the USD fell sharply against the EUR, pushing the oft-traded currency pair to 1.4310. The dollar experienced similar behavior against the GBP and closed at 1.6588.

The dollar had begun the day staging a modest recovery after Monday's steep drop, but the trend changed quickly as U.S. stocks turned higher, helping to renew the recent rally in higher risk currencies. Analysts said the dollar's failure to recover shows that investors are convinced the we have seen the worst of the global crisis, and only have room to improve, which is encouraging them to buy higher risk currencies and assets.

A leading indicator released yesterday was the Pending Home Sales report. The figure saw its biggest monthly gain in 7.5 years which indicated that the U.S recession was easing. However, it failed to provide strength to the Dollar as investors may be waiting for key data due to be released today to implement their trading strategies.
Looking ahead to today, the most important economic indicator scheduled to be released from the U.S. is the ADP None-Farm Employment Change at 12:15 GMT. Analysts are forecasting this figure to decrease from its previous reading. Traders will be paying close attention to today's announcement as a stronger than expected result may boost the USD in the short-term. Traders are also advised to follow Federal Reserve Chairman Ben Bernanke's testimony at around 14:00 GMT. This testifies is very important as it is very likely to Impact the Dollar volatility. Traders are advised to watch closely, as this is likely to set the pace of the Dollar going into the rest of the week's trading.

EUR - Will the EUR Hold its Recent Gains?

The EUR was affected by two main things in yesterday's trading; the global stock market rally and mixed feelings ahead of Thursday's Interest Rate decision by the European Central Bank (ECB). The U.S. stock market rally led investors to buy-back into the EUR, and dropped the Dollar, as investors looked for returns on risky investments in Tuesday's trading.

The EUR appreciated by around 120 pips versus the USD to close at 1.4300 in yesterday's trading. The EUR/GBP pair closed almost unchanged at 0.8631 ahead of Thursday's Interest Rate decisions for both the Euro-Zone and Britain. Overall, the EUR, which for the last few months has been sold by most traders, is seeing these sell-positions unwind and is now making a small recovery. The question now is can EUR bullishness continue versus the Dollar?

Sentiment in the Euro-Zone economy has brightened in the past week following better-than-expected news. The EUR is showing signs of resilience even though there was volatility throughout non-Euro crosses. It will be crucial for traders to identify how the preceding economic indicators from the U.S., Japanese, and other key economies will affect their positions.

JPY - Yen Experiences Mixed Results against Major Currencies

The Yen completed yesterday's trading session with mixed results versus the other major currencies. The JPY was broadly unchanged versus the EUR yesterday and closed its trading session at around the 136.60 level. The JPY also saw bullishness against the USD as it jumped around 70 points and closed at 95.70.
The Bank of Japan needs to keep an eye on the global economy as the Japan's finance minister, Kaoru Yosano, said the country's worst post-war recession has already hit bottom. But a full recovery might not come until early 2010 as manufacturers gradually lift output from very low levels.

Traders today have very little fundamental news emanating from Japan as the only indicator being released is the capital spending report. Analysts forecast the figure to decrease from its previous reading. This indicator typically generates small amounts of volatility. However, the GBP and the USD appear to be clutching the reins of today's market. Traders would be wise to note its future direction as it usually carries a heavy impact on the other currencies.

Crude Oil - Traders Await Crude Oil Inventory Report

Crude oil rebounded from the day's lows, finishing little changed at $68.20, as the dollar weakened against the EUR, bolstering the appeal of commodities as an alternative investment. Oil prices have risen every day since May 21 on snips of moderately good news from manufacturers, home builders and the U.S. government.
Today, the release of crude oil inventory is likely to help determine the market's next direction for Black Gold. Oil inventories have fallen in each of the previous three reports from the Energy Information Administration but remain close to an 18-year high. The result of this was a dramatic increase of commodity prices. A release of a string of positive economic figures could help continue its bullishness. Therefore, traders are advised now to make some profits as the price of Crude Oil is set to remain volatile in the short-medium term.

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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!