Swine Flu Prompts a Return to Safe Haven Buying

Traders continue to be influenced by the pandemic of Swine Flu in Mexico. Fears of reduced short term economic activity have traders moving out of riskier, higher yielding currencies into the safe haven Dollar and Yen. Crude Oil prices also fell yesterday as investors fear a weakening demand for international travel.

USD - Dollar Rises on Swine Flu and Lower Equity Markets

Yesterday's trading in the currency market was highly influenced by the outbreak of swine flu in Mexico. Worries about a spreading outbreak drove losses in equity markets, and with that came forex traders buying safe haven currencies. As such, the Dollar and the Yen were the prime beneficiaries. The Dollar rose sharply against the EUR as comments by the European Central Bank (ECB) President sunk the European currency along with other risk sensitive currencies. However, the Dollar fell against the JPY.

The flu pandemic has been driving trading in the financial markets the past two days. A void of economic data has also created opportunities for markets to head south. Trading has been characterized as extremely risk averse. Losses in equity markets and moves to the Dollar and Yen were seen as an example of this trading behavior. However, this pattern may be only short lived as an important economic indicator is set to be released tomorrow.

The Conference Board will release its Consumer Confidence index at 2:00pm GMT. The survey is a leading indicator of consumer spending and is an excellent gauge of current economic conditions and the overall economic situation. The release of the survey typically creates a volatile trading environment, affecting not only the USD pairs but also the value of Crude Oil and Gold. A survey with a result greater than the forecasted value of 29.6 could send the EUR/USD below the 1.2950 mark.

EUR - ECB Remarks Punish the EUR

The EUR suffered its largest 1-day drop versus the Dollar in a month on comments from two members of the European Central Bank (ECB). ECB Governing Council member Ewald Nowotny remarked there is the potential to hold European Interest Rates at a low for the foreseeable future. Later in the day ECB President Jean-Claude Trichet declared that the ECB will announce at its next scheduled meeting on May 7th a new program of quantitative easing. This sent the EUR/USD plunging to 1.3024 from 1.3166. The EUR/JPY also suffered during yesterday's risk adverse trading session, ending the day at 125.43 from 127.18.

It is expected that the ECB will lower Interest Rates by 25 basis points to 1.25% at their next meeting. No further comments were made by Trichet of the proposed unconventional measures for monetary policy. However, further weakening may be seen in many of the EUR pairs in the coming days. This is likely to be more apparent if traders continue to flock to safe haven currencies, such as the USD and JPY as the Swine Flue pandemic continues to spread.

Throughout the day today Preliminary Consumer Price Index numbers will be released. This data is the Euro-Zone's earliest inflation numbers and could help to lower the EUR during today's trading. The EUR currency crosses are also likely to be affected by important economic news events coming out of the U.S. and Britain. These include the U.S. CB Consumer Confidence at 2:00 pm GMT and the British CBI Realized Sales at 10:00 am GMT.

JPY - JPY Goes Bullish on Safe Haven Status

The Yen showed signs of a return to its risk haven status of old as fears of Swine Flu have traders moving out of riskier, higher yielding currencies into the safe haven of the Yen. The logic of this move is a wider outbreak of the flu may increase the amount of time the global economy will need to recover from the current recession. In light of these market conditions, the Yen continues to strengthen. The USD/JPY fell for a 9th day in a row to settle at 96.30 from 96.59. The Yen also climbed against the GBP, ending the day at 140.69 from 140.97.

Japanese banks will be closed for a Bank Holiday today. Major institutional banks are key contributors to liquidity in the forex market. With their closure, price moves can become exaggerated by currency speculators. This can provide ripe opportunities for forex traders to take advantage of the unusual price volatility today. Additionally, traders are likely to take advantage of this more during times of important data releases coming out of the key industrialized nations today.

Crude Oil - Crude Oil Dips on Swine Flu Fears

The price of Crude Oil fluctuated greatly yesterday as worries of Swine Flu took hold of the market. Crude Oil dipped as low as $47.98, though it failed to break a key support level. The price finally settled at 49.37 from an opening price of $50.34. Worries that any economic recovery could be delayed due to transportation restrictions or the flow of human capital would severely hurt Crude Oil demand and sank the price of Oil yesterday.

The long term impact of Swine flu could have a muted impact. As such we could see a fair value of Crude Oil near the mid $40 range. Notably higher Crude Oil inventories during the warmer months is implying that fuel consumption will be significantly lower in the upcoming peak travel season. In the meantime, better-than-expected economic data from the U.S. and Euro-zone may help prevent Crude prices from slipping further into the red.

Article Source - Swine Flu Prompts a Return to Safe Haven Buying
Swine Flu Prompts a Return to Safe Haven BuyingSocialTwist Tell-a-Friend

US Dollar Extends Gains as Stock Markets Tumble on Stress Test Results (Euro Open)

The US Dollar extended gains in overnight trading, testing below 1.30 to the Euro as Asian stock markets erased early gains and US equity index futures slipped over 1% on news that stress tests of Bank of America and Citigroup revealed the two lending giants will need additional capital.

Key Overnight Developments

• Japanese Retail Sales Shrink for Seventh Month on Unemployment
• US Dollar Rises as Asian Stock Exchanges Erase Early Gains

Critical Levels

The Euro oscillated in a well-defined 40-pip range for much of the overnight session but bearish momentum seemed to pick up ahead of the opening bell in London, pushing prices to test below the 1.30 level to the US Dollar. The British Pound trended lower, shedding as much as -0.6% against the greenback. Technical positioning favors a bearish outlook on both EURUSD and GBPUSD.

Asia Session Highlights

Japan’s Retail Trade figures revealed that sales shrank for the seventh consecutive month in March, shrinking at an annual pace of -3.9% after a -5.8% contraction in the preceding month. The pattern is a familiar one: dwindling overseas sales have pushed firms to scale back capacity, boosting unemployment and weighing on consumer spending to keep downward pressure on overall growth. Indeed, yesterday saw Japan’s government forecast that the world’s second-largest economy will shrink -3.3% this year, the recession since the Second World War. Finance Minister Kaoru Yosano said Japan remains in “crisis”.

The US Dollar added 0.3% on average against a basket of to global currencies, boosted by demand for safety as Asian stock markets erased early gains and US equity index futures pushed deeper into negative territory. The MSCI Asia Pacific Index slipped -1.5% and futures on the Dow Jones and the S&P 500 indices slipped over 1% on news that Bank of America and Citigroup were told by US regulators that they still need additional capital following a series of “stress tests”.

Euro Session: What to Expect

Preliminary estimates of Germany’s Consumer Price Index are expected to show that prices rose 0.1% in April to bring the annual inflation rate to 0.8% from 0.5% in the previous month. It would be premature to say the rebound owes to a pickup in economic activity, and even more so premature to suppose that prices will continue to rise from here. Currency depreciation may account for the increase, making imported goods comparatively more expensive for German consumers. Indeed, the Euro has shed 2.1% on average against the currencies of Germany’s top non-EZ import partners (China, UK, US). If the economy is indeed showing some life, this likely owes to record low interest rates and an 82 billion euro government stimulus package. The ability of these measures to spur sustainable growth seems questionable at best, however: the world’s fourth-largest economy could afford a far greater fiscal effort considering the kind of spending being done by the US, China and Japan; on the monetary front, Germany’s experience with hyperinflation in the 1920s have made it thoroughly averse to anything that even smells like printing money, putting its representatives to the European Central Bank at the head of the faction arguing against quantitative easing. This half-hearted approach means that private demand will likely be slow to step in to pick up the baton after the government’s boost is exhausted, keeping unemployment at elevated levels and holding back spending. Indeed, the jobless rate is expected to reach above 9% by the end of this year. Adding yet more wood to the fire, the International Monetary Fund recenly reported that European banks, many of them German, still carry $1.1 trillion in unrealized losses linked to subprime assets.

In Switzerland, the UBS Consumption Indicator is likely to continue lower in March after printing at the lowest level in 5 years in the previous month. The unemployment rate stands at 3.4%, the highest in 3 years, and is expected to surpass 4% by the end of this year. This will trim disposable incomes and is likely to continue to discourage spending.

Written by Ilya Spivak, Currency Analyst
Article Source - US Dollar Extends Gains as Stock Markets Tumble on Stress Test Results (Euro Open)
US Dollar Extends Gains as Stock Markets Tumble on Stress Test Results (Euro Open)SocialTwist Tell-a-Friend

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.


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!