USD - Could the Dollar Continue Its Bullish Trend?
Last week gave some extraordinary opportunities for Forex traders to make profits from going long on the U.S Dollar. The two leading fronts on which the USD marked unique gains are against the EUR and the GBP.
It appears that the USD saw this bullish trend as a result of some unexpected positive news, especially regarding the housing sector. Last week, both the Existing Home Sales, and the New Home Sales, delivered better than expected figures, reflecting in 4.72M residential buildings that were sold during February, and in 337K new single-family homes that were sold during February as well. This data came as a big surprise, as analysts had quite gloomy predictions for the two reports, and therefore turned a very strong uptrend for the Dollar. In addition, as you all must remember, this entire recession began as a result of a deep crisis in the U.S home sector, and now a series of positive result from that sector has managed to elevate the USD so rapidly. Another positive data which came last week were the Durable Goods Orders indices which delivered both much better than expected figures. Whilst analysts anticipated negative growth in the total value of new purchased orders for durable goods during February, the real figures showed almost 4.0% growths.
As for the week ahead, two major events will most likely determine the Dollar's direction for the upcoming week. The first will be the Pending Home Sales which is currently expected to continue to positive line of the housing sector; however a surprising negative result could create some worries among investors regarding the U.S economy. The second major news event will of course be the Non-Farm Employment Change, expected on Friday, 12:30 GMT. as proven many times before, investors are putting a lot of faith in the credibility of this survey, and as such react immediately to its results.
Traders are advised to follow those two leading economic indicators as they are likely to set the tone for the USD trading this week.
EUR - Would the ECB Cut Interest Rates to 1.00% Later On This Week?
An extremely volatile week, which included many ups and downs, concluded with a deep drop for the EUR. The EUR/USD dropped to almost 1.32, and the EUR/JPY fell below 129.50.
The first reason for the EUR drop was the strengthening Dollar, which rose against the EUR as well. The second and even greater reason was the unwillingness of the European Central Bank (ECB) to create a rescue plan for the European Nation, which could somehow imitate the American plan. Investors are now seeing the U.S economy as a dynamic, flexible economy, in which its leaders are doing all they can in order to salvage the situation while they can. On the other hand, the European monetary system is beginning to be seen as a conservative organization, which is reluctant to react to the rapidly changing conditions of the global economy. Investors are thirsty for a European rescue plan, and if one shall arrive, it will probably signal an uptrend for the European currency.
As for this week, the ECB will announce the new Minimum Bid Rate on Thursday, and is widely expected to cut Interest Rates by 0.5% to merely 1.00%. Some might say that this move is too little, too late, as the U.S, Japan and Great Britain have all lowered their Rates below 1.00%, without succeeding in making a real change in their economies. Nevertheless, if indeed the ECB will decide to cut Interest Rates, an immediate reaction of a drop in EUR value is expected.
Forex traders are also advised to follow Jean-Claude Trichet's speech on Monday, as he may discuss the possibility of cutting Interest Rates. Such comments could have massive influence on the market.
JPY - The JPY Looks to Halt Its Bullish Momentum
Over the last trading week the JPY saw rising trends against the EUR and the GBP, and experienced mixed results vs. the USD. The JPY underwent it most remarkable bullish trend against the EUR, as the EUR/JPY dropped to the 129.40 level.
Last week the Japanese Trade Balance showed a difference of -0.04T between exported to imported goods during February. Although this is a negative figure, it was much better than the -0.29T which was expected. This indicator has an immense impact on the Japanese economy as it relies greatly on its export activity. Also last week, the Tokyo Core Consumer Price Index, which measures the change in price of goods and services, rose by 0.4% in March, also indicating that the Japanese economy is on the phase of expanding, and not contracting.
As for the week ahead, most of the impacting data will be delivered from the Euro-Zone and the U.S economy. Nevertheless, traders should follow the Tankan Indices, which are expected on Tuesday night. These surveys cover a wide range of the local manufacturers, and thus have a large impact on the Yen. Analysts forecast extremely negative figures for the indices, and such result might generate a bearish trend for the JPY.
OIL - Will Crude Oil Reaches Below $50 a barrel?
Crude Oil prices has dropped dramatically just before the weekend. After peaking at over $54 a barrel, Crude Oil is currently traded for $51.50 a barrel. Crude Oil prices fell predominantly as a result of the surging Dollar. Crude Oil is priced in Dollars, and as such, a rising trend for the USD tends to have to opposite affect on Crude Oil.
Another data that helped to lower Oil prices was the U.S Crude Oil Inventories indicator from Wednesday, which came higher-than-expected, reflecting 3.3M additional barrels of Crude Oil held in inventory by commercial firms from the previous week. The combination of high supply and strong Dollar are a simple formula for dropping Crude Oil prices.
As for this week, traders should follow global economic news, especially from the U.S, as they are likely to determine Oil prices. Traders are advised to keep notice that for as long as the USD continues to appreciate, Crude Oil prices might continue to decline, as low as $50 a barrel!
Article Source - Greenback Rallies on Speculation the ECB will cut Rates to Its Lowest.
Key Overnight Developments
• Japan's Industrial Production Falls to Record Low on Weak Overseas Demand
• Australian Home Sales Rise on Rate Cuts, Government Grants
The Euro and the British Pound slipped as much as -0.6% against the US Dollar in overnight trading as a slump in risky assets fueled demand for the safe haven asset du jour.
Asia Session Highlights
Japan’s Industrial Product shrank fell -38.4% in the year to February, setting a new record low. The theme at work is a familiar one: dwindling overseas sales are pushing Japanese companies to cut back output, boosting unemployment to put downward pressure on consumer spending and overall economic growth. Later this week, the Tankan survey of business confidence is expected to show sentiment is at the worst in over three decades. Policymakers have scrambled to check the deepening downturn: the Bank of Japan has agreed to expand liquidity-boosting measures while the Finance Minister has pushed for trillions of yen in additional fiscal stimulus. Ironically, the sheer depth of the current malaise may help to spur the recovery. Increasingly dismal economic data has turned risk-averse investors away from the Japanese Yen, sending the currency tumbling by a hefty -12.2% to date from the peak high January. Sustained downward momentum will encourage overseas sales by making Japanese goods cheaper for foreign buyers, breathing new life into the export-dependent economy.
In Australia, HIA New Home Sales grew 3.9% through February, boosted by aggressive interest rate cuts as well as cash handouts to first-time home buyers put in place as part of the Prime Minister Kevin Rudd’s fiscal stimulus package. The Reserve Bank of Australia has trimmed benchmark borrowing costs to 3.25%, a 45-year low, while the government has tripled the available grant for home buyers to A$21,000. Additional monetary stimulus is also expected, with overnight index swaps pricing in 50 basis points in rate cuts over the next 12 months.
Euro Session: What to Expect
Euro Zone Economic Confidence is set to remain at a 24-year record low for the second consecutive month in March. The reading is a composite of several surveys measuring the confidence among consumers as well as the industrial, services, and construction sectors. The result reflects expectations that the current economic downturn will continue in the near to medium term.
On balance, risk trends are likely to emerge as the primary driver of forex price action. Stocks fell for the first time in six days across Asian exchanges as fears of deepening recession returned to the forefront and drove investors back towards safe-haven assets. The MSCI Asia Pacific Index slipped 2%. Comments from Jamie Dimon and Ken Lewis, CEOs of JPMorgan and Bank of America, further weighed on confidence. Dimon said March was “a little tougher” while Lewis said his bank’s lending book was not as good in the last month of the first quarter as the first two. Commodities followed equities lower on speculation that persistently sluggish economic growth will curb demand. US equity index futures are down about 1% ahead of the opening bell in Europe, suggesting the selloff is set to continue and implying the US Dollar is likely to extend recent gains.
Written by Ilya Spivak, Currency Analyst
Article Source - US Dollar Extends Gains as Stocks, Commodities Tumble in Asian Trading (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!