8.17.2009

Empire State Manufacturing Index to Lead USD Trading

The U.S. Dollar gained versus the EUR but extended losses against the JPY since Friday, after the U.S. Consumer Sentiment index unexpectedly declined in early August. The data aided the Dollar, which in many instances has tended to move in the opposite direction to its economy, due to higher risk aversion. The most important data expected today is the Empire State Manufacturing Index and TIC Long-Term Purchases from the U.S. at 12:30 GMT and 13:00 GMT. It is recommended that you open big positions in the USD's main pairs now, as market volatility builds up today.



USD - U.S Dollar Soars against the EUR and GBP

After going through the beginning of last week with falling trends, the Dollar finished last week significantly higher against most of its major currency pairs. However, against the Yen, the Dollar continued to drop, and the pair now stands at the 94.50 level.

The Dollar's bearishness at the start of last week's trading was owed to much negative U.S economic data. The Federal Budget Balance showed pessimistic, proving that the U.S. federal budget is deep in deficit. Additionally, the U.S. retail sales data was unexpectedly negative, emphasizing that U.S consumers have yet to regain their faith in their financial security. What's more, the Federal Reserve avoided hiking Interest Rates last, despite its record low. Both of these factors led to an extremely bearish USD.

The Dollar's downtrend was reversed in the latter part of last week, as the relatively positive inflation data, which was published via the Consumer Price Indices (CPI) managed to make investors bullish on the Dollar. The drop in commodities prices, such as Gold and Crude Oil, was another dominant factor responsible for USD recovery.

Looking ahead this week, much market moving data is expected from the U.S. economy. Amongst the main publications are the Building Permits and the Producer Price Index (PPI) on Tuesday, and the Existing Home Sales on Friday. The Building Permits is expected to be the best figures in 8 months, and the Dollar is likely to strengthen as a result. However, the PPI is forecasted to deliver its first negative result since March. Negative inflation data could erase the Dollar's recent recovery. Traders are advised to open their USD positions now, in order to make maximum profits this week.

EUR - EUR Set For a Volatile Trading Week

The EUR saw an incredibly volatile session during last week's trading. The European currency began the week with a sharp bullish trend against the Dollar, just to lose its gains close to the weekend. The EUR saw a significant uptrend against the British Pound on the one hand, yet a sharp drop against the Yen on the other hand.

It seems that the EUR's volatility has come as a result of the mixed data form the Euro-Zone's major economies. For example, the French economy saw its first signs of recovery as the French Industrial Production rose by 0.3% in June, suggesting positive inflation. However, European Industrial Production dropped by 0.6% in June. The German Gross Domestic Product (GDP) unexpectedly rose by 0.3% in the 2nd quarter, showing that the German economy unexpectedly rose out of recession. On the downside for the EUR last week was that the European Consumer Price Index dropped by 0.7% in July, indicating that inflation is still dropping in the Euro-Zone.

As for the week ahead, a much important data is expected to be published from the Euro-Zone, which is also likely to have a great impact on EUR volatility. The German ZEW Economic Sentiment will be released on Tuesday, and analysts forecast a result of 45.2. Such an outcome is likely to boost the EUR, as this will show that the German economy is continuing to improve. Considering that the German economy is the strongest economy in the Euro-Zone, this result could have a great impact on the EUR. Traders are also advised to follow the German PPI on Wednesday as this may provide much support for the EUR this week.

JPY - Yen Rises to a 2 Week High vs. the EUR

Last week, the Yen rose against all the major currencies. The USD/JPY dropped around 300 pips to the 94.50 level. The Yen rose about 500 pips against the EUR, and saw an 800 pips rise against the Pound!

The Yen's recent uptrend is largely due to positive data from the Japanese economy. For example, the monthly Core Machinery Orders report showed a 9.7% increase, better than the 2.8% forecast. Also, late last night, Japan's Prelim GDP results showed a rise of 0.9% in the 2nd quarter, which was slightly below estimates. This led to the JPY rising to a 2 week high vs. the EUR and a basket of other currencies in early trading. This week week, the main publications that are expected from Japan are the All Industries Index on Wednesday at 04:30 GMT. Analysts forecast the result to be 0.4% as opposed to May. If the final result comes in line with forecasts, the Yen is likely to build on its recent bullishness against its major currency counterparts.

OIL - Crude Oil Plummets Below $68

Crude Oil's high volatility continues, and a barrel of oil has once again dropped below $70 in the past day, and currently stands at $67.93 in early Monday trading. Crude dropped last week on speculations that reduced demand and rising stockpiles in the U.S will lead higher supplies during the upcoming North Atlantic hurricane season. However, if the hurricane season isn't as many people expect, then the of Oil may actually plummet further.

The recent strengthening of the Dollar in the past week has also had a strong impact on Crude Oil prices. USD strength typically impacts Dollar-denominated commodities because it makes them more expensive for holders of other currencies. If the Dollar will continue to strengthen during the next few days, Crude Oil's recent dive in value may continue.

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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!