USD - USD Awaits Today's Non Farm Employment and Unemployment Figures
The Dollar was down against the EUR Thursday after the European Central Bank's (ECB) decision to keep the main Interest Rate at 1.0%. The Dollar Index also slipped to 79.446 from 79.499 on Thursday.
Dampening demand for the Dollar in recent weeks has helped the U.S. stock market rise and global Oil prices jump to near $70 a barrel. Higher stocks have encouraged traders to take their positions out of the Dollar which is a major funding currency. Risk appetite among investors is improving which reduces demand for the Dollar. The USD is considered a safe-haven currency, a key to the currency's strength during the financial crisis.
The recent influx of positive economic news from the U.S, Europe and China reduced the desire for the safety of the greenback and pushed traders towards riskier, higher yielding currencies. The Dollar fell against the EUR., but rose against the Pound and JPY. The GBP/USD rate finished lower by nearly 140 pips at 1.6128.Against the EUR, the USD lost 30 pips to close at 1.4198.
Overall there was little volatility in the market yesterday, ahead of the much anticipated May Non-Farm Employment Change and Unemployment Rate reports to be released today at 12:30 GMT. Positive news may help reverse some of the Dollar's
EUR - EUR recovers on Trichet's speech
The EUR recovered from a one-week low against the USD Thursday. However, trading remained inside a narrow range, staying roughly within the $1.40-$1.43 range. The EUR/USD rate closed at $1.4198 from $1.4168 on Thursday. Additionally, the EUR/JPY finished trading at 137.39 Yen from 136.22 Yen. These results show the EUR recovered after a climb in U.S stocks and a relatively optimistic speech by the European Central Bank's (ECB) President Jean-Claude Trichet. He stated that he believes the region's economic performance will improve later this year.
The European Central Bank decided Thursday against cutting its main Interest Rate, maintaining it at 1.0%. Although low, this rate is still higher than the Federal Reserve's key rate, which is in a range between 0% and 0.25%. This means that yields on the EUR based assets remain more attractive than those denominated in the USD. The ECB's reluctance to ease monetary policy further gives way to further strengthening of the EUR.
Traders should pay close attention to the U.S Non-Farm Employment Change and U.S Unemployment Rate reports to be released today at 12:30 GMT, as well as the GBP PPI Input to be released at 8:30 GMT.
JPY - JPY Plummets as Safe-Haven Status Comes Under Threat
Japan's currency declined Thursday versus 15 of the 16 most traded currencies. The USD/JPY rate closed at 96.74 Yen per USD from 96.15 Yen yesterday, and at 137.29 Yen per EUR from 136.22 Yen on Thursday. The fundamentals in Japan are quite poor. Furthermore, the yields are extremely low and many Japanese investors are opting to buy higher yielding assets oversees while selling the Yen, therefore devaluing the Japanese currency further.
The release of the U.S Non-Farm Employment Change report today may put further downward pressure on the Yen, and it is likely to continue its losses against the USD and EUR. This is increasingly likely, as the expectation is that employers in the U.S. cut fewer jobs last month as the deterioration of the labor market slowed.
Crude Oil - Oil Rallies Towards the $70 Price Level
Crude Oil rose dramatically on Thursday, rising to a seven-month high. Crude Oil prices rose to $69.22 yesterday, an increase of more than $3 a barrel. Crude prices quickly recovered from Wednesday's steep losses and resumed the march toward $70 a barrel. The rally followed a forecast made by a Goldman Sachs analyst stating that “As the financial crisis eases, an energy shortage lies ahead”. The bank set a 12-month price target of $90 a barrel, up from $70.
Expectations of a quick economic recovery dominate long-term prospects for Oil trading. Oil prices recovered very quickly from a Department of Energy report showing a surprise increase in U.S. Crude Oil inventories on Wednesday. The release of the Unemployment Rate data today may put some strain on Oil prices as the rate is expected to rise. However, as optimism seems to be the leading force in the markets, rising equities and a weakening Dollar may prove to have a greater affect on Oil prices than the unemployment results.
Article Source - U.S. Non-Farm Employment Change Data to Dominate USD Trading
What is Forex?
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 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.
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!