European Economic Sentiment Plunges, EUR Flattens

Surprising the market yesterday was the release of the German ZEW Economic Sentiment report which showed confidence throughout the Euro-Zone's largest economy had plunged throughout the previous month, highlighting that economic fundamentals have finally hit home the fact that recovery is not yet around the corner. This report, since identifying what was already known, had a muted impact on the value of the EUR as investors had likely already priced in the bad news from previous economic reports. Today's economic figures will likely have a much stronger effect on the market now that confidence reports more closely resemble the market itself.

USD - USD Bullish on Goldman Sachs Earnings; Mixed from Retail Sales

The US Dollar completed yesterday's trading session with mixed results versus the major currencies as U.S. data on retail sales and producer prices beat expectations, boosting hopes that the economy is on a slow path to recovery. By yesterday's close, the USD had fallen against the GBP, pushing the oft-traded currency pair to 163.25. The greenback did see some bullishness as well as it gained 50 pips against the JPY and closed at 93.56.

Investment bank Goldman Sachs reported strong profits yesterday, but economic signals from the United States and Europe dimmed optimism that a global recovery may be on the horizon. In addition, U.S. retailers beat expectations with a 0.6% sales rise in June, boosted by a big jump in auto sales. But excluding both autos and gasoline, sales were down 0.2 % in a fourth consecutive monthly decline. The slight rise in risk appetite also boosted higher-yielding currencies at the expense of both the Yen and USD, which tend to see their biggest gains when investors grow anxious and buy them as safe havens.

USD trading will be interesting today as important economic data is expected to be released. From 12:30 GMT a series of economic indicators will begin to be released, starting with Core CPI figures, the Empire State Manufacturing Index, Industrial Production and Crude Oil Inventories. Surprisingly, almost all of these releases are expected to be higher than their previous figures, meaning the USD could show bullishness today. Traders are also advised to follow FOMC Meeting Minutes at 18:00 GMT. This meeting is very important as it is very likely to impact the Dollar's volatility. Traders are advised to watch closely, as this is likely to set the pace of the Dollar going into the rest of this week's trading.

EUR - EUR Pressured by German Economic Sentiment Figures

The EUR finished yesterday's trading session with mixed results versus the major currencies. The 16-nation currency extended gains versus the Japanese yen on Tuesday, to trade above $130.75 amid a broad sell-off in the yen. The EUR experienced similar behavior against the CHF as the pair rose from 151.40 to 152.10 by days end. The EUR did see bearishness as well as it lost around 60 pips against the GPB and closed at 0.8560.

Data showed German investors have turned more pessimistic than expected in July for the first time in nine months, a signal analysts say means the nation's economy will not start growing until next year at least. Euro-Zone industrial production data also disappointed, growing only slightly in May after a bad release in April and remaining 17% lower than it was a year earlier.

Optimism about the German economy has grown in recent weeks, with data pointing to stabilization in the manufacturing sector and government officials saying gross domestic product (GDP) could be flat or slightly higher in the April-June period, breaking a string of four straight quarters of contraction. But the Mannheim-based ZEW economic think tank's monthly index of economic sentiment fell yesterday to 39.5 from 44.8 in June, the first drop since October 2008, signifying that expectations for a speedy recovery have begun to fall.

JPY - Yen Losing Ground on All Fronts

The JPY saw a bearish trading session yesterday, losing ground against most of its currency crosses. The JPY fell sharply against the Sterling Pound, pushing the oft-traded currency pair to 152.50. The Japanese yen experience similar behavior against the EUR and closed at 130.55.

The Japanese market should have a heavy effect on the JPY versus its major currency counterparts, as the Overnight Call Rate will be announced today. The rate is expected to remain unchanged, but traders should pay close attention to the BoJ Press Conference that will follow to look for expectations of Japan's economic future. A bullish statement from the BoJ could lead some traders to believe that it is forecasting a rosier financial climate in Japan.

Crude Oil - Crude Oil Inventories to be Released Today

Crude Oil prices rose slightly yesterday in seesaw trading as concerns about consumer demand tempered an earlier rally on optimism reflected in a global equities rally. Oil prices have fallen by about $14 a barrel, or 19%, since June 30th after poor employment data from the U.S. and Europe raised doubts that the global economy was poised for a strong recovery this year.

Today, the release of crude oil inventory data is likely to help determine the market's next direction for the black gold. Moreover, a release of a string of positive economic figures from the U.S could help 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.


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!