US Dollar Supported as Stocks Rally, Australian Dollar Options Signal Losses (Euro Open)

The US Dollar held up in overnight trading despite a sharp rally on Asian stock exchanges. Currency options markets showed traders betting on an end to the Australian Dollar’s four-month rally. June’s Euro Zone Industrial New Orders are on tap ahead.

Key Overnight Developments

• Currency Markets Ignore Rally on Asian Stock Exchanges
• Australian Dollar Options Traders Price in Bearish Reversal

Critical Levels

The Euro kept to a narrow 20-pip range above 1.4330 in overnight trading. The British Pound followed suit, trading sideways above the 1.65 level.

Asia Session Highlights

With no significant economic data on the calendar, currency markets took a muted tone in overnight trading. A strong equities rally failed to translate into meaningful FX volatility: Asian shares rose on last Friday’s US Existing Home Sales and optimistic comments from Fed Chairman Ben Bernanke, both of which have already been priced into exchange rates.

Currency options markets showed the Australian Dollar rally that began in early March may be running out of steam. Options to sell the Aussie next month rose to cost 2.32% more than to buy the currency at current rates, showing traders were willing to be the biggest premium to protect against a drop in the Australian unit since mid-February. Technical positioning is supportive of a bearish scenario.

Euro Session: What to Expect

The economic calendar is decidedly bare in European hours, with June’s Euro Zone Industrial New Orders report the only item on the docket. Expectations call for orders to rise 1.6%, the largest monthly increase in 17 months. Manufacturing figures across most key markets have shown signs of improvement in recent months on the back of aggressive government stimulus measures (often focused on infrastructure projects) and widespread inventory restocking efforts. Still, the long-term trend in orders is far from encouraging: the annualized rate of decline is set to print at -28.6%, a reading well within the range of values noted since the beginning of the year. A meaningful, sustained return to growth will require the re-emergence of private demand in the Euro Zone’s key export markets, an outcome that seems unlikely considering nearly all of them (excluding Russia) are expected to see unemployment rise at least through 2010, trimming incomes and discouraging spending.

Written by Ilya Spivak, Currency Analyst
Article Source - US Dollar Supported as Stocks Rally, Australian Dollar Options Signal Losses (Euro Open)
US Dollar Supported as Stocks Rally, Australian Dollar Options Signal Losses (Euro Open)SocialTwist Tell-a-Friend

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!