8.13.2009

USD Setback Could Change Course Following Today's Retail Sales

After suffering a mild setback following the release of yesterday's Federal Funds Rate policy statement, the USD now seems poised for a come-back. At the opening of the US market today at 12:30 GMT, traders will catch a glimpse of US retail sales and unemployment claims which are both expected to show a continuation of growth in the United States helping the USD regain some of yesterday's losses.



USD - Dollar Down on All Fronts Except JPY Following Fed Statement

The U.S. Dollar trimmed earlier losses against major counterparts on Wednesday after the Federal Reserve left Interest Rates unchanged, near zero percent. The Dollar pared earlier losses versus the EUR in the first 20 minutes after the Fed's statement on optimism that the end of the purchase program would reduce the risk of inflation, which erodes the purchasing power of the greenback. However, the USD resumed its decline afterwards as stocks gained.

Against the Japanese yen the U.S. Dollar kept broad gains after the Federal Reserve painted a less gloomy outlook for the U.S. economy, an assessment that led investors to return to commodity-linked currencies in droves. The Federal Reserve has also said it would slow the pace at which it buys Treasuries by extending the duration, but not the size, of its $300 billion program to buy long-term government securities.

Analysts have said that while sentiment toward riskier assets has improved, there was a general degree of caution on the Fed's move to extend the time-frame of asset purchases as it indicated that the economy was still vulnerable. Today, forex traders will catch a glimpse into US Retail Sales and the weekly unemployment claims report. If sales continue to grow in the US, as is forecast, the USD may be capable of going bullish later in the day.

EUR - The Sterling Remains under Downward Pressure

The European currency gained for a 3rd consecutive day against the U.S Dollar before the European Union's statistics office releases its 2nd quarter Gross Domestic Product numbers in Luxembourg. GDP in the 16-nation Euro-Zone shrank 0.5% after a 2.5% contraction in the 1st quarter, according to economist predictions.

The EUR also advanced against 13 of the 16 major currencies before the release of a U.S. report that may show retail sales gaining for a third straight month, prompting investors to seek higher-yielding assets.

The British currency had weakened yesterday ahead of the release of the Bank of England's (BOE) quarterly inflation report. The Pound fell against the Dollar after the BOE said it may miss its inflation target amid a slow recovery. Fear of undershooting the target means the central bank is more likely to hold off on increasing rates, analysts have said.

Britain's currency also dropped versus the Yen after the central bank's governor said it was more likely that inflation will slow below 1% this year and unemployment may reach a 14-year high.

JPY - Yen Falls on Low Safe-Haven Demand

The Yen fell for a 2nd consecutive day against the EUR after the Federal Reserve said economic activity is leveling out, sapping demand for Japan's currency as a refuge. The Yen depreciated to as low as 96.23 from 95.51 vs. the US Dollar at the close of Tokyo stock trading. A weaker domestic currency increases the value of overseas sales at Japanese companies when repatriated.

The JPY also weakened against all 16 major currencies as Asian stocks extended a U.S. equity rally on signs the global slump is abating, encouraging investors to buy higher-yielding securities. For today, most attention will be paid to the New Zealand Dollar (NZD) following the evening release of its retail sales reports. With a recently bullish NZD, this report has the potential of creating a reversal to this trend if it comes out worse than forecast.

Crude Oil - Oil Prices Rebound above $70 a Barrel

Crude Oil ended higher Wednesday as a rally on Wall Street and sudden Dollar weakness overshadowed government data showing a bigger-than-expected rise in crude supplies. While the fundamental picture is bearish, Crude is being supported by a weaker U.S Dollar and stronger equity markets. Traders appeared to shrug off government data showing a build-up in crude supplies. Oil's strength came despite a report from the U.S. Energy Information Administration (EIA) showing U.S. Crude Oil Inventories rose 2.5 million barrels in the week to August 7, well over analysts' expectations.

Oil trimmed gains after the U.S. Federal Reserve in its policy statement said the U.S. economy is leveling out and that it was extending purchases of long-term U.S. Treasury debt to the end of October. Crude also rose as the International Energy Agency (IEA) boosted its oil-demand outlook for this year and next. In its report yesterday, the IEA said that the world will need 85.25 million barrels of oil a day next year, 70,000 barrels more than previously estimated.

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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!