Traders Focus on Commodities as USD Slides

The U.S. dollar has ceded further ground on Monday as concerns about the U.S. economy abated and broadly improved corporate earnings lifted risk appetite and regional stock markets. The weak U.S. dollar had traders pushing up commodity prices. Crude remained relatively steady above $64 a barrel, after rising 2.5% on Friday on positive U.S. housing data that revived hopes of a global economic recovery.

USD - Dollar Declines on Concerns About the U.S Economy

Last week the U.S dollar saw bearish trends against most of the major currency pairs. The Dollar dropped over 200 pips against the EUR and over 300 pips against the Pound during last week's session. The Dollar weakened last week despite rather positive indications from the U.S economy. Economists said that although the earnings and data from the housing sector suggest the U.S. economy is showing signs of a recovery investors are still reluctant to pour capital in to it.

It seems that the positive figures from the U.S economy has lead investors to believe that the world is showing real signs for pulling out of recession. Expectations are that an improvement in the U.S economy situation will be resulted in an improvement in different economies as well, especially the European ones, and this has raised the European currencies against the U.S dollar.

There is little U.S. data to drive the market this week, so the focus will be on Federal Reserve Chairman Ben Bernanke's semiannual monetary policy testimony to Congress. Traders will be seeking clues on whether the Fed will begin unwinding some of the huge stimulus measures it undertook at the height of the U.S. financial crisis.

EUR - EUR Soars against the Majors

The EUR rallied last week against all the major currencies. The EUR's most significant appreciation was against the Japanese yen, as the pair rose over 400 during last week's session. The EUR also marked a bullish session against the U.S dollar and the British pound.

The EUR soared last week as a result of some relatively positive data from the Euro-Zone leading economies. Both the German and the European ZEW Economic Sentiments delivered positive figures, proving that investors and analysts continue to hold their optimistic view regarding the European financial condition. The two reports have failed to reach expectations, yet the final result was still positive enough to strengthen the EUR. The slide of the Dollar also contributed to the rising EUR, and as a result, traders who went long on the EUR last week saw nice profits.

Looking ahead to this week, many interesting economic publications are expected from the Euro-Zone. The data that should affect the EUR the most will probably be from the leading economies such as Germany and French. The Purchasing Manger's Index from the leading economies is expected on Friday, and currently analysts forecast rather positive results for the indices. If the actual results will be similar to predictions, traders might see the EUR continues its bullish trend.

JPY - Yen Bullishness Halts

Last week may have signaled the end of the JPY's bullish trend. The Yen has weakened against all the major currencies including the Dollar, the EUR and the Pound.

During last week, the Bank of Japan (BoJ) has decided to leave the Japanese Interest Rates at 0.10%, which are the lowest rates in the western world. It seems that the Japanese chiefs have managed to weaken the JPY. The Japanese leaders feel that a weak Yen will support the export of the country, and thus will improve the general economic condition. In addition, the Tertiary Industry Activity reports has shown that the change in the total value of services purchased by businesses dropped by 0.1% on June. This means that businesses in Japan are cutting off spending, proving that Japan has yet to pull out of recession. If the BoJ will continue with its policy to depreciate the Yen, and the financial reports from Japan will continue to show negative figures, the Yen could depreciate further.

As for the week ahead, many significant data is expected from the Japanese economy. Yet the most significant report seems to be the Trade Balance, which is scheduled in Wednesday. The report will show the difference in value between imported and exported goods and services during May. Current expectations are for a very positive result. If the actual result will indeed be similar to forecasts, this will mean that the BoJ succeed in supporting the Japanese export, and might strengthen the Yen.

OIL - Could Crude Oil Reach $70 a Barrel?

Crude Oil marked an extremely bullish session last week, rising from $58 a barrel up to $65 a barrel. The bullish trend came mainly as a result of the better than expected U.S data and the weak U.S dollar.

Oil's gains on Friday were boosted by a government report that showed construction of new homes and the issue of building permits in the United States rose more than expected in June, signaling a potential economic recovery.

In addition, the demand for Crud Oil in the U.S has an immense influence on the value of oil, and thus, when positive signals from the U.S economy are likely to create speculations that demand for oil will rise soon.

Looking ahead to this week, traders should continue follow the leading indicators from the U.S economy, as they seem to have a very string influence on Crude Oil prices. Traders should also closely watch for the U.S Crude Oil Inventories report on Wednesday, as this report has proven to have an immediate impact on Crude oil's prices.

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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!