9.08.2009

Forex Market to Move on News Coming from Europe and Canada

In forex trading, the USD is set to have relatively quiet news today. This lack of major news indicates that the other major currencies, such as the GBP, EUR and CAD, may be the market movers today and traders should pay close attention to each of their respective economic news releases.



USD - Dollar Falls as Labor Day Holiday Takes Its Toll

The U.S. Dollar fell against a number of its major crosses due to U.S. markets being closed. Looking at Monday's trading as a whole, the Labor Day holiday in the U.S. took its toll on the American currency. In early trading yesterday, the USD fell to a near 2 week low vs. the British Pound. This was after Kraft Foods stated that it made an offer to buy British chocolate maker Cadbury. Despite the low trading volume on Monday, it seems that risk appetite was high, and high-yielding currencies became more attractive. The Dollar Index dropping by 0.2% to 78.00 yesterday is evidence of this.

The USD/JPY cross fell by 25 pips yesterday to the 92.85 level, as many traders ditched the U.S. currency for the Yen due to the improving global economy and the thin trading of Labor Day. The Australian Dollar hit a 1 year high vs. the U.S. Dollar on Monday. The AUD was helped due to rising Gold and Crude Oil prices as of late, which Australia's currency is highly dependent. In addition, Australia's currency is in much greater shape than that of America. The Canadian Dollar made some inroads into the greenback. By the end of yesterday's trading, the EUR/USD pair closed unchanged at 1.4332.

Looking ahead to today's trading, there is the U.S. Consumer Credit figures at 19:00 GMT. The other releases that are expected to affect the main USD crosses are the British Manufacturing Production at 08:30 GMT, the German Industrial Production result at 10:00 GMT and Canadian Building Permits figures from at 12:30 GMT. The volume today is likely to be high following yesterday's bank holidays in both the U.S. and Canada. We might see the EUR/USD and GBP/USD close over 100 pips away from the opening. If you want to make big profits today, buy into the USD's crosses now.

EUR - EUR Trading Dominated By Optimistic Data

On Monday, EUR trading was driven by German Factory Orders rising for the 5th consecutive month in July by a higher than forecast 3.5%. This was much needed confidence for Europe's largest economy. Major benchmark indexes rose in all the western European markets. The German DAX climbed by 1.5%, and the British FTSE 100 added 1.7%. Despite the positive figures from Germany, Europe's biggest economy is still a long way away from returning to desirable levels. It can be said that the recent G20 Meetings helped return confidence to the European currency.

The EUR snatched a 3rd consecutive day of gains against the British currency, as the pair rose by 30 pips to close at the 0.8777 level. This was largely due to German industrial data helping the EUR, which was much needed boost for the European currency. The EUR/USD cross finished trading unchanged at the 1.4232 level. This was owed to the U.S. Labor Day bank holiday. The GBP/USD pair rose in earlier trading yesterday, but ended up 60 pips lower at the 1.6343 level. The GBP declined yesterday, due to an equity market rally, which led to traders dropping the cable.

Today, there is much economic news that is expected to determine the value of the both the EUR and GBP. There is the British Manufacturing Production at 08:30 GMT, the German Industrial Production at 10:00 GMT, and the British Nationwide Consumer Confidence at 23:01 GMT. There is likely to be a continuation of much of Monday's trends. However, the volatility may increase a lot, as regular trading returns to the forefront. It is advisable to buy into the main EUR, GBP, and CHF crosses, as today's trading kicks in.

JPY - JPY Expected to Slide

The Yen fell to its lowest level in a week vs. the EUR. However, the EUR/JPY eventually finished yesterday's trading 30 pips lower at the 133.18 level. In the coming days, it seems that the Japanese currency may slide as global equities are expected to rise. Analysts expect this to reduce demand for the JPY as a safe-haven. This behavior was already seen on Monday, as the JPY dropped vs. the AUD and the NZD.

The recent election victory of the Democrat Party has led to much speculation amongst investors that the JPY may slide in the coming weeks and months. Many people believe that this inexperienced party will increase taxes too high, and will be unable to handle Japan's finances well. Therefore, these analysts conclude that there may be a downward spiral of the Japanese currency in the near future.

Crude Oil - Crude Oil Eyes OPEC Meeting

Crude Oil finished trading virtually unchanged at $68.12. This behavior was largely owed to the U.S. markets being closed on Monday. Therefore, there was lower than usual volatility in both the forex market and the commodity market. Furthermore, in mid-trading many investors ditched Crude Oil for equities, which was initiated by the announcement of the attempted takeover bid by Kraft Foods of Cadbury.

OPEC is set to meet on Wednesday 9th September, and is expected to maintain the production target of 24.845 million barrels a day in Vienna, according to Kuwaiti Oil Minister Sheikh Ahmed Al-Sabah. As trading volume returns back to normal today, there is likely to be very high fluctuations in the price of Crude Oil. Traders will be keeping one eye on tomorrow's OPEC meeting, and another eye on USD strength.

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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!