USD - USD Hits 5 Weeks Low against the EUR
The Dollar pared losses against the EUR on Monday after the New York Federal Reserve Bank's manufacturing index fell to a record low in March, adding to worries about the U.S. economy. The USD experienced some gains, rising to $1.3000 from around $1.3055 yesterday, however it still remained down 0.9% during the trading session.
Moreover, economic data published yesterday imply that the U.S. recession is likely to deepen further. To give an example of the type of negative data emanating from the American economy, the Empire State Manufacturing Index had its worst showing since 2001! This is also a signal that economic difficulties are starting to spread from the financial sector into the mainstream economy. Investors will have to adapt themselves to the upcoming economic hardships as these changes will not rectify themselves within a short period of time.
Later today, there are several important economic data releases coming out of the U.S. The most important of these publications is the Building Permits indicator at 12:30 GMT. The release is expected to be lower than the previous figure, meaning the USD could continue a level of bearishness today. Traders should stay close to the market as there is a strong chance to capitalize on the fluctuations which will likely follow this release.
EUR - EUR Gains against Major Currencies
The EUR experienced a bullish trading session yesterday, as it appreciated against most of its major currency pairs. The 16 nation's currency hit a five-week high against the USD yesterday as gains in European stocks signaled investors' willingness to take on more risk.
A rise in Euro-Zone inflation last month helped push the EUR above $1.30 for the first time since Feb. 10 in early trading. A pledge by the G20 finance ministers during a weekend summit to double the resources available to aid emerging market economies also lifted spirits.
In addition, European Central Bank (ECB) President Trichet said last week that deflationary risks were negligible, even as he left the door open to another Interest Rate cut. The central bank, which expects inflation to average just 0.4% this year, has already reduced its key Rate by more than half since early October to a record low of 1.5%.
Looking ahead to today, the most important financial indicator scheduled to be released from Europe is the German ZEW Economic Sentiment. Analysts are forecasting this figure to slightly decrease from its previous reading. Traders will be paying close attention to today's announcement as a stronger than expected result may continue to boost the EUR in the short-term.
JPY - Yen Slides on Weakening Economy
The Japanese Yen completed yesterday's trading session with mixed results versus the major currencies. The JPY fell against the EUR yesterday, pushing the oft traded currency pair to 1.2171. The JPY experienced similar behavior against the GBP as the pair rose from 137.50 to 138.50 by days end.
The Yen's safe-haven appeal has, however, lost some of its luster due to a rapid deterioration in Japan's economy, with the trade balance falling into deficit, and political uncertainty with an unpopular government facing an election that must be held by October. The Bank of Japan is seen likely to keep Interest Rates unchanged at 0.10% at a two-day policy meeting that ends on Wednesday. The BOJ is also expected to discuss whether to raise its purchases of government debt but market players are unsure if the central bank will make such a move at this week's board meeting. The Bank may be forced to increase purchases of government bonds if the country's economic slump deepens suddenly or banks start to fail, moving closer to a quantitative easing policy it has been trying to avoid.
OIL - Crude Oil Prices Soar $3 Higher
The Crude Oil's gains on Monday were helped in part by an early rally in U.S. and European stock markets on growing confidence in the banking sector, which outweighed Organization of the Petroleum Exporting Countries (OPEC) decision not to cut production target further.
The cartel which met on Sunday, decided not to cut output further, but rather concentrate on existing cuts that total 4.2 million barrels per day since September. Some analysts said OPEC's adherence to the existing cuts might be enough to offset falling demand and reverse the recent increases in oil inventories in many countries, including the world's largest oil consumer, the United States. However, in light of U.S grim economic data which confirms that long recession in the world's largest economy is far from over, the Crude might fall below $47 giving up its previous session's gains.
Article Source - EUR/USD Hits Two Months' High
Key Overnight Developments
• Japan's Tertiary Index Unexpectedly Higher on IT Demand
• Australia Has “Flexibility” To Cut Interest Rates Again, Says Central Bank
• Euro, British Pound Follow Risky Assets Higher Against US Dollar
The Euro and British Pound both pushed higher against the US Dollar in overnight trading as capital flowed into risky assets and pushed stocks higher across most Asian exchanges. The single currency is working to hold above the 1.30 mark while sterling is consolidating above 1.41.
Asia Session Highlights
Japan’s Tertiary Index rose 0.4% in January after two consecutive declines in the previous two months. Information and communication services demand led the reading higher. Importantly, the trend continues to point lower with the metric down -3.9% in annual terms. At this point it remains premature to call this a rebound: dwindling overseas sales are continuing to push Japanese companies to cut back production capacity and boosting unemployment to put downward pressure on consumption, including that of services. Some hope may lay ahead if the recent decline in the Japanese Yen is to be sustained, helping to encourage overseas sales by making Japanese goods cheaper for foreign buyers. The currency has slipped -11.3% to date since topping out in January.
Minutes from the last policy meeting of the Reserve Bank of Australia showed policymakers opted to keep rates on hold in March to access the impact of existing fiscal and monetary measures but maintained that there as scope for further easing. The bank said the near term economic outlook remains “weak” though credit demand seemed to be responding to rate reductions and noted it has “adequate flexibility” to lower borrowing costs again.
Euro Session: What to Expect
Germany’s ZEW Survey of investor sentiment is expected to drop to -8.0 in March from -5.8 in the previous month, marking the first decline in four months. The measure jumped the most since 1993 in February on hopes that the twin offensives from monetary and fiscal authorities will kick-start growth by the end of this year. Since then, the economic data flow has been less than encouraging: the unemployment rate rose to the highest in 9 months, retail sales fell twice as much as was expected, and the current account surplus shrank to the narrowest in over 3 years as exports tumbled. Meanwhile, the European Central Bank has sharply revised its projections for economic growth and inflation, saying output could shrink as much as -3.2% this year while the pace of price growth falls as low as 0.1%. The analogous reading for the broader Euro Zone is expected to print at -12.0 in March, down from -8.7 in February.
In Switzerland, the State Secretariat for Economic Affairs (SECO) is set to publish the March revision of the government’s economic forecast for 2009. The December issue of the publication cut growth expectations from 1.3% to -0.8% for the current year. A survey of economists conducted by Bloomberg calls for a -1.0% contraction.
Written by Ilya Spivak, Currency Analyst
Article Source - Euro Rally Threatened with Investor Confidence to See First Drop in Four Months (Euro Open)
What is Forex?
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 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.
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!