7.01.2009

ADP Employment Data to Drive the Majors Today

The surprise drop in consumer confidence in the United States yesterday has resulted in a sudden buy-up in USD as investors flock to safe-havens. With a market that appears to be lacking a clear direction recently, major reports such as the CB Consumer Confidence report yesterday, and today's ADP Non-Farm Employment Change report become that much more important to watch as more investors await their release before trading.



USD - USD Trades Higher on Economic Outlook

The greenback gained Tuesday as a report on U.S. home prices showed that the pace of price declines may be slowing and manufacturing data from June came in slightly better than expected. The Dollar may extend its gains versus the EUR after a report showed an unexpected drop in U.S. consumer confidence for June, increasing demand for the safety of the world's main reserve currency.

The USD traded at 1.4035 versus the EUR, following a 0.4% gain yesterday. The dollar also fetched 96.35 yen following a 0.3% advance. Tuesday's data gave investors more reasons to buy the U.S Dollar. For months, improvements in the outlook for the economy, financial markets or other companies has led to stock gains and weighed on the USD, taken as a signal of reduced demand among investors to hold the safe-haven currency.

However, analysts have said that the Dollar may be near a turning point, after trading in a pattern closely correlated with equity moves. Investors have sold U.S. Dollars recently as stock markets and oil prices rose on an upbeat view for prospects of a global economic recovery, hurting demand for the greenback as a safe haven.

Investors now await the U.S. government's high-profile monthly employment report. The jobs data is due on Thursday as U.S. financial markets will be shut on Friday for Independence Day.

EUR - EUR Holds Steady vs. Greenback and Rallies against JPY

The EUR gained versus the U.S Dollar on speculation European Central Bank (ECB) policy-makers will today signal that the central bank will keep Interest Rates on hold into next year to aid an economic recovery. ECB member Axel Weber said last week that the central bank has used up its scope to cut Rates. Policy-makers will leave the benchmark rate unchanged at this week's meeting, according to analyst predictions.

There is also an improving sentiment in the Euro-Zone's economic conditions. European economic confidence rose more than economists forecast in June, the European Commission in Brussels reported yesterday, signaling the region's slump is abating. Analysts predict that the ECB will keep Rates at 1% for the foreseeable future. And that might turn the EUR further on the upside.

The European currency has advanced the most in 4 months against the Yen, last traded at 135.56 yen from 135.21 yesterday. When it reached 135.96 for a brief stint yesterday, this was the highest level reached since June 15. The EUR has risen 7.1% versus the Japanese yen this year and doesn't seem to be losing any momentum.

JPY - Yen Declines as Investors Dump Safety Demand

The Japanese Yen weakened against the EUR and the Dollar yesterday after a report showed China's manufacturing expanded for a 4th consecutive month, dampening demand for the relative safety of Japan's currency. The JPY fell to 135.80 per EUR and weakened to 96.95 per U.S. Dollar from 96.36. The Yen also fell against 15 of the 16 most-traded currencies after an Australian report showed retail sales climbed for a 3rd month, giving investors more confidence to purchase higher-yielding assets.

Although, the Bank of Japan's (BOJ) June Tankan corporate survey showed on Tuesday that big manufacturers' sentiment pulled back from a record low hit 3 months ago, the improvement was smaller than forecast. The Yen edged down against the Dollar after the news but the market's reaction was subdued overall as investors decided that it offered no surprise.

Analysts said that the market has considered all the positive factors that have come out and is starting to react more to negative factors. The market is lacking clear direction and is likely to stay in an adjustment period for now.

Crude Oil - Crude Oil Momentum to Rise Further

Crude Oil rose above $70 a barrel after an industry report showed the biggest decline in crude inventories since September in the U.S., the world's largest user of the fuel. Also today, the Energy Information Administration (EIA) report will probably give a better direction to the market.

A U.S. Energy Department report today will likely show Crude Oil stockpiles declined 2 million barrels, according to economists' estimations. A fall in crude inventories may cause the commodities market to move higher, and will reinforce Crude to stay at or go above current levels.

Oil prices yesterday spiked above $73 a barrel, which stood as the June high for more than 2 weeks, as the Dollar declined and escalating militant attacks in Nigeria raised concern that supplies may be disrupted. Crude Oil is set to extend gains amid this week's volatility and may reach the $76 a barrel level.

Article Source - ADP Employment Data to Drive the Majors Today
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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!