Euro May Extend Losses as German Jobless Rate Hits Highest in Nearly 2 Years (Euro Open)

The Euro may extend recent losses in European trading hours as Germany’s unemployment rate rises to 8.4% in July, the highest since November 2007, as the Euro Zone’s largest economy sheds 43,000 jobs. Euro Zone Economic Confidence is also on tap.

Key Overnight Developments

• Japan’s Industrial Production Grows Most Since 1953 in Q3
• Euro, British Pound Flat Ahead of the Opening Bell in Europe

Critical Levels

The Euro is effectively unchanged going into the European trading session having oscillated in a narrow 0.4% range around 1.4050 in overnight trading. Likewise, the British Pound fluctuated in a 0.4% band around 1.6380, yielding a flat result ahead of the opening bell in London.

Asia Session Highlights

Japanese Industrial Production grew at the weakest pace in three months in June, adding 2.4% from the previous month. In annual terms, the pace of decline moderated to -23.4%, the slowest rate of contraction since December of last year. On a quarterly basis, output gained 8.3% in the three months through June, the most since 1953. Much of the resurgence can be chalked up to companies replenishing inventories having sharply cut back on orders and production as the global economic crisis reached a boiling point in 2008. More of the same is likely in the coming months as restocking continues. In fact, minutes from the last meeting of the Bank of Japan revealed policymakers expect manufacturing and exports will continue to recover “mainly due to progress in adjustments in [inventories]”. That said, any sustainable rebound will have to come with growth in underlying demand, which is arguably destined to remain sluggish for some time. Indeed, the International Monetary Fund (IMF) said its latest world economic outlook that global trade volumes are likely to rebound just 1% having shed a whopping -12.2% in 2009.

Euro Session: What to Expect

Germany’s Unemployment Rate is set to rise to 8.4% in July, the highest since November 2007, as the Euro Zone’s largest economy sheds 43,000 jobs. Mounting layoffs will hinder Germany’s ability to mount a robust recovery from the current downturn, weighing on disposable incomes and discouraging consumption, the largest component of overall economic growth. Indeed, the IMF recently forecast that Germany as well as the Euro area as a whole will stand apart from other industrialized economies in seeing GDP continue to shrink in 2010. Further, the ailing labor market is likely to become a more visible drag on risk appetite as the government’s fiscal package is used up and firms run out of room to cut capacity and produce upside earnings surprises, yielding to sluggish revenue growth and driving stock valuations lower. This bodes ill for the Euro, particularly against the US Dollar, with interest rates likely to remain low and risky assets on the defensive.

Separately, Euro Zone Economic Confidence is expected to rise to 75.0 in July, marking the fourth consecutive month of improvement since the metric hit a record low in March. The reading is a composite of five sub-sector sentiment reports: Industrial Confidence (40%), Service Confidence (30%), Consumer Confidence (20%), Construction Confidence (5%), and the Retail Trade Confidence Indicator (5%). The metric may continue to gain for a bit longer as the combined impact of fiscal stimulus measures across the region and higher stock prices boost confidence, but seems likely to reverse course in the medium term as lackluster domestic and overseas demand creep back into the forefront.

Written by Ilya Spivak, Currency Analyst
Article Source - Euro May Extend Losses as German Jobless Rate Hits Highest in Nearly 2 Years (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.


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!