7.02.2009

U.S. Non-Farm Employment Change Data to Drive USD Volatility Today

The forex market is expected to be extremely volatile today, as the U.S. releases the results of the Non-Farm Employment Change at 12:30 GMT. The EUR Minimum Bid Rate at 11:45 GMT and U.S. Unemployment Claims at 12:30 GMT are also expected to dominate trading for the USD, EUR, and GBP crosses. Traders are advised to enter the main currency pairs now in order to profit from risk appetite.



USD - Dollar Plummets on Release of Poor Economic Data

The Dollar index continued its decline yesterday, trading at 79.619, down from 80.179 late Wednesday. The drop followed the release of the ADP Non-Farm Employment Change which showed worse than expected results. The drop was exacerbated by China's request to discuss the issue of a new global currency at next week's G8 Summit in Italy.

Increased risk appetite has been dominating trading lately, despite much pessimistic
economic data. Recent bullishness in the stock markets helped fuel risk appetite among investors, putting further downward pressure on the Dollar. Worse than expected results no longer automatically push investors back to the safety of the Dollar, as risk tolerance remains high on positive equity prices. Furthermore, negative data from the U.S., along with an over-expanding budget deficit and inflation fears have caused concern over the greenback's long term prospects. As a result, this has further dampened Dollar sentiment.

With several major news releases ahead of the July 4th weekend, including the U.S Non Farm Employment Change and Unemployment Rate due at 12:30 GMT, and the ECB Press Conference at the same time, Thursday is expected to be a volatile trading day which may intensify the current trends.

EUR - EUR Boosted By Increased Risk Appetite

The EUR continued its advance against the USD yesterday, reaching its highest level in nearly a month. The European currency received an additional boost after the release of better than expected results from German Retail Sales. Since Germany is the largest economy in the Euro-Zone, it tends to have significant effects on EUR movements.

The EUR/USD pair hit as high as $1.4201 after the release of the U.S. ADP Non-Farm Employment Change report, which showed worse than expected results. However, the EUR/USD finished trading at 1.4115, whilst the the Pound Sterling was at $1.6464 from $1.6449.

Traders should pay close attention to the ECB Press Conference at 12:30 GMT as monetary policy and economic outlook will be discussed. Although the Interest Rate is expected to remain unchanged at 1%, the statement will provide insight to the Bank's new covered-bond purchase program, as well as the progress of the quantitative easing program. This will provide direction for the EUR by possibly extending its recent gains.

JPY - JPY Gains against USD Ahead of Crucial U.S. Data Releases

The Yen gained against the Dollar ahead of the release of the U.S Non Farm Employment Change and Unemployment Rate which may show that unemployment in the U.S rose to the highest level in 25 years. To a certain extent, this spurred demand for the safety of the JPY. Traders should be aware that the USD/JPY pair will be the main pair to watch today as data is released from the U.S.

The Japanese currency has been suffering recently due to increased optimism and risk appetite among investors, who traded the relatively safe JPY for higher yielding riskier currencies. Although risk tolerance remains high in the market, worse than expected results from the U.S and Euro-Zone may help extend the JPY's gains throughout the day.

Crude Oil - Crude falls Below $70 on Release of Inventories Data

Crude Oil fell by over $2.50, or 5%, to $69.01 a barrel on Wednesday. The drop came after the U.S. Energy Information Administration (EIA) released a report showing that Crude Oil Inventories are 18.3% higher than last year. Despite falling inventories in the past 4 weeks, demand continues to be weak, whilst supply remains abundant.

Despite recent gains in the equity markets and the continued weakness of the Dollar, Oil has had difficulties sustaining prices above $72. This is as demand continues to lag and inventories remain high. Today's trading session may provide some boost to Oil prices as U.S unemployment data which is set to be released today may exacerbate the Dollar's recent bearish trend.

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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!