8.14.2009

Dollar Anticipates Release of U.S. Core CPI

The U.S. Dollar anticipates the release of U.S. Core CPI at 12:30 GMT. The reason this publication is so important is due to it being a leading measure of U.S. economic growth and inflation. A positive figure is likely to help the USD gain strength throughout today's trading. The USD will also be affected by its yesterday's bearishness, as there may be a slight correction in the greenback. Traders should open their USD positions now in order to make maximum profits from end-of-week trading.



USD - USD Slides on Poor Economic Data

During yesterday's trading, the Dollar dropped against all the major currencies. The Dollar dropped as much as 100 pips at one point against the EUR on Thursday, and saw bearish trends against the Pound and the Yen as well.

The Dollar weakened yesterday as a result of series of negative economic data releases. The U.S Retails Sales unexpectedly dropped by 0.1% in July, failing to reach expectations to rise by 1.8%. The U.S Core Retails Sales dropped by 0.6% in July too. The difference between the two reports is that the core report measures the change in the total value of sales at the retail level, excluding automobiles, due to the high volatility of automobile sales. The fact that both indices showed negative figures proves that American consumers are still cautious regarding their expenses, lacking the confidence that the worst of the recession is behind us

The other important release that helped push down the Dollar on Thursday was the weekly Unemployment Claims report which showed that 558,000 individuals filed for unemployment insurance for the first time during the past week. Both the negative Retails Sales data and the poor employment figures showed that the U.S economy is yet to pull out of recession, and thus the Dollar weakened as the trading day progressed.

Looking ahead to today, the leading data seems to be the Consumer Price Indices (CPI). The CPI measures the change in price of goods and services purchased by consumers, and thus act as a leading inflation gauge. Traders are advised to focus their attention on the Core CPI report, which excludes food and energy prices, as it tends to deliver a more reliable figure. Current forecasts suggest that prices have stayed quite stable during July. It appears that if the actual result will be similar or slightly better, it may correct some of yesterday's losses for the Dollar. However, in case of a worse-than-expected result, the Dollar is likely to continue tumbling.

EUR - EUR Soars on Positive GDP Figures

The EUR saw a volatile trading session yesterday. The EUR rose significantly higher against the Dollar, as the EUR/USD reached the 1.4300 level. However, the EUR saw mixed results against both the Yen and the Pound.

It appears that the EUR's appreciation came as a result of the better-than-expected economic data. The German Preliminary Gross Domestic Product (GDP) unexpectedly rose by 0.3% in the 2nd quarter. The GDP report measures the change in the inflation-adjusted value of all goods and services produced by the economy. The positive result generated speculations that the German economy is recovering sooner then expected, as many analysts wrongly forecast that the German economy will only pull out of recession by the middle of 2010.

Later on in Thursday's trading day, the European Flash GDP was released, showing that the Euro-Zone's GDP dropped by 0.1% during the 2nd quarter, beating expectations for a 0.5% slide. The better-than-expected figures created the sensation that the Euro-Zone economy is following the U.S optimism which we have seen in the past 2 months that the recession will end sooner than expected. As a result, this has strengthened the EUR.

As for today, a batch of data is expected from the European economies. The French Preliminary Non-Farm Payrolls will be released, and analysts forecast that 0.7% people have lost their jobs during the previous quarter in France. The European Consumer Prices Indices are also expected today, and are predicted to deliver mixed results. It currently seems that if the actual results will be similar to forecasts, the EUR may drop slightly due to the overall negative figures.

JPY - Yen Rises on Asian Equity Rally

The JPY started yesterday's trading with bullish trends against all the major currencies. The Yen continued to rise against the Dollar, yet later on lost gains against the EUR and the Pound. The Yen soared against the major pairs as a rally in Asian stocks spurred demand for higher-yielding assets. The Bank of Japan stated yesterday that Japan's economic conditions have stopped worsening, and are likely to turn upward over time. This created positive sentiment which was reflected in Asian stock markets, and was followed by a strengthening Yen.

Yesterday, the Tertiary Industry Activity report showed that the total value of services purchased by business rose by 0.1% in June. This is another indication that Japanese consumers feel safer to enlarge their expenses, which means that the general sentiment is that the economy is doing better. Looking ahead to today, no significant data is expected from the Japanese economy. Traders should mainly focus on the major data releases from the U.S economy, as this is likely set the tone for today's trading.

Crude Oil - Crude Oil Eyes $73 a Barrel

Crude Oil continued to rise yesterday, marking the second consecutive day of rising prices. A barrel of Crude Oil rose to over $72 during yesterday's trading session, and now eyes $73 a barrel. Crude was helped by a weak USD Dollar, as the commodity is valued in Dollars, and thus a drop of the Dollar against the major currencies is usually followed by a rise in commodities prices, especially Oil.

The rise in Crude Oil and the weak USD was largely due U.S equities rallying to a 10-month high, and the German and French economies delivering better than expected data. What seems to be an early recovery for the leading western economies has sparked optimism for a rebound in fuel demand. It currently seems that every positive economic figure from the U.S or the Euro-Zone may spark an appreciation in Oil prices, as expectations for higher fuel demand are constantly growing.

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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!