USD - Swine Flu puts Downward Pressure on the USD and Tourism
The U.S. Dollar appeared to be losing ground against all of its major currency counterparts towards the end of last week's trading. It dropped to one-week lows against its rivals, falling to 1.3300 against the EUR, 1.4750 against the Pound, and 96.65 against the JPY last Friday. Apparently a number of news events, not wholly related to economic fundamentals, made an impact on the value of the USD last week.
With Ecuador claiming that they will continue to use the USD as their currency, the greenback received a modest level of support from the southern Hemisphere, not necessarily unrelated to President Barack Obama's recent meeting with South American leaders.
In other news, fears of the recent outbreak of swine flu put a major dent in the Dollar as traders began speculating that U.S. tourism would drop in the coming months as a result, and therefore pulled out from the greenback in exchange for an alternative safe-haven. Also, the run-up to the latest round of G7 and IMF meetings put a slightly positive spin on world stocks and the idea of a balanced investment portfolio. This lent weight to the notion of pulling money away from the USD.
The good news for the USD is that it has begun an across-the-board correction during today's early trading hours due to a number of Dollar-positive news events. Recent announcements that Chrysler, an American auto giant, may not need to declare bankruptcy has returned some confidence to the U.S. currency. The impending light news week also has the Dollar prepared to take a seat on the bench for the days ahead. Without driving its own market, the USD is more susceptible to world trends and may therefore be at the mercy of the EUR and JPY this week. With a few potentially damaging reports due, the USD may climb back towards 1.3000 against the EUR and 97.50 against the Yen over the next few days.
EUR - EUR Positive After PMI and Ifo Provide Surprising Results
The EUR gained steady momentum against most of its currency rivals last week. Hitting a one-week high against most of its currency counterparts, the EUR climbed above 1.3300 against the Dollar and near 0.9100 against the Pound Sterling. The question remains as to whether the 16-nation currency can hold onto these advances throughout the coming week.
Startling news emerged from the Euro-Zone as the European Union (EU) made overtures towards the idea of Iceland joining the union. After its national bankruptcy last year, the small island country has been struggling to catch up.
In economic news, the staggeringly high PMI numbers from the Euro-Zone regional economy generated a strong movement towards the EUR at the end of last week's trading; no doubt adding to the EUR's bullish run. Supporting this bullish momentum was the additional news from the German Ifo Business Climate report which signaled that the Euro-Zone may actually have bottomed and is beginning its steady road to recovery.
With the moderate news week ahead for the EUR, we may see the recent strength continue so long as economic fundamentals produce better than expected results like they did last week. However, the optimism which was soaring high at the end of last week, may have corrected itself downward as the realization of an economy hitting rock bottom sank in. While a good signal that the Euro-Zone is starting its recovery. The long road ahead may indeed stymie this bullish movement. Traders may want to look for a downward-correcting EUR this week.
JPY - JPY's Recent Gains Set to Reverse
The Japanese Yen was set to advance itself throughout this week, after gaining steadily against most of its rivals, especially the USD. However, as the Nikkei index opened lower at the start of this week, the Yen's safe-haven move may have ended abruptly this morning. Growing as high as 96.65 against the USD and 127.50 against the EUR, the Yen may now see a correction throughout the impending hours due to poor stock performance and a USD-positive trading session.
With the recent scare over the swine flu outbreak in the United States, the JPY was bought up as an alternative safe-haven against the USD as tourism in the U.S. was expected to drop. Nevertheless, the JPY now appears to be paring off its recent gains as stock markets indicate a lack of confidence in the Japanese currency. Traders may look to the Yen depreciating against most of its currency rivals throughout the next few days, especially with a heavy news week for the JPY which may illuminate the inherent weakness of the island economy.
Crude Oil - Is OPEC Planning Further Production Cuts?
After failing to breach the resistance level of $52 a barrel last week, the price of Crude Oil appears to be coming back down. Recent press releases from the various oil ministers in member countries of the Organization of Petroleum Exporting Countries (OPEC) have stated that the latest price volatility has been damaging to the future of the oil industry. Such volatile price swings as those seen over the past 8 months can cause irreparable carnage to an industry in need of heavy foreign investment.
Without clear data regarding the current supply and demand levels in the world's energy supplies, organizations such as OPEC have little to go on but recent price levels. If prices don't find strong support in the coming weeks, the cartel may be forced to call for further production cuts in order to boost prices back to levels where investment becomes feasible. If oil prices continue where they are, this move may be more likely. Traders need to keep an eye on hawkish statements such as these from members of OPEC as it could signal a shift towards further production cuts, and the possibility of an increase in the value of Crude Oil.
Article Source - Greenback is Knocked Down by the Swine Flu in Mexico
Key Overnight Developments
• US Dollar Rises as Dow Jones, S&P 500 Futures Slip Over 1%
• Euro, British Pound Follow Risky Assets Lower
The Euro trended lower against the US Dollar, losing as much as -0.7%. The British Pound followed suit, shedding as much as -0.6% against the greenback. Technical positioning favors a bearish outlook on both EURUSD and GBPUSD.
Asia Session Highlights
With little of note on the economic calendar, markets fell back on risk sentiment as the principal driver for forex price action. Futures on the Dow Jones and S&P 500 stock indices slipped over 1%, suggesting investors are betting that Wall St. stocks will move lower to start the trading week. The MSCI Asia Pacific Index erased initial gains after Hong Kong stocks dropped over 2% in early trading as Financial Times reported that American Express Co. and Allianz SE will sell their stakes in ICBC, China’s biggest bank, for a combined $2 billion. Asian exchanges initially moved higher following Friday’s Wall St. rally on news that the US Federal Reserve’s stress tests revealed most banks are adequately capitalized.
The retreat in risky assets boosted US Dollar – an index of the greenback’s average value against six top global currencies gapped higher to start the week and rose as much as 0.5% ahead of the opening bell in Europe. The US Dollar has been seen as a safe-haven asset amid falling stock markets, showing a -84% inverse correlation with global stock performance (based on a 90-day rolling correlation study).
Euro Session: What to Expect
An uneventful economic calendar is likely to yield to risk sentiment as the principal driver for forex price action in European hours. If stock markets continue to slip into negative territory, the US Dollar is likely to extend gains against the spectrum of major currencies.
A brief scan of European data is set to reveal deepening recession – the Import Price Index is set to drop -6.5% in the year to March, the most in over a decade; meanwhile, the GfK Consumer Confidence Survey is expected to print at 2.3 in May, the lowest since February.
Written by Ilya Spivak, Currency Analyst
Article Source - US Dollar Pushes Higher as Traders Bet on Wall St Weakness (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!