USD - Dollar Volatility Calms as Markets Falter
The Dollar experienced a mild trading session in yesterday's trading. The USD experienced a relatively flat day as it steadily rose against all of its major currency pairs, except for the Japanese Yen. There was a quiet day of news from the U.S. as there were no economic data releases on the calendar. However, Federal Reserve Board Chairman Ben Bernanke spoke about the state of the U.S. economy and the stress test for banks. He pointed out specifically that he was pleased with banks for raising capital. Investors were optimistic as he said that additional capital from the Federal Reserve will be provided if needed.
Despite this positive news from Bernanke, the stock market in the U.S. and around the world experienced heavy losses. However, part of this may be the start of a correction to the global stock market rally in recent weeks. As a result, the Dollar gained against most of its major currency pairs. The USD took 70 pips from the EUR to close at 1.3591 and a healthy 125 pips from the Pound to close at 1.5095. However, against the JPY, the Dollar lost 100 pips, extending its 3 day loss vs. the Japanese currency. The USD gained against the former 2 currencies due to fears of economic instability.
Today we can expect a higher amount of volatility and instability when it comes to trading with the Dollar and its main currency crosses. This may be even more so due to a heavy schedule of economic data releases and the ambitious economic recovery plan of President Barack Obama. The Trade Balance figures will be published at 12:30 GMT, IBD/TIPP Economic Optimism figures are expected to be released at 14:00 GMT, and the Federal Budget Balance results are scheduled to be published at 18:00 GMT. Positive figures may help spur a stock market rally. At the same time, the Dollar may go bearish, as investor fears dissipate and the global economy continues its slow recovery.
EUR - EUR Stumbles Against Dollar
The European currency stumbled against the Dollar in Monday's trading, ending its 3 day winning streak against the USD. This comes around the same time the President of the European Central Bank (ECB), Jean Claude Trichet, stated that the main developed economies are starting to show signs of growth. For example, The Organization for Economic Co-operation and Development (OECD) recently released figures showing that Britain, France, and Italy's economies recorded some growth in the previous month. However, Germany continues to lag behind in negative territory. This may be one of the factors that could prevent the EUR from gaining the long-term confidence of investors.
As long as Germany, Europe's largest economy, is deep in the red there will continue to be a prolonged burden on the Euro-Zone and its currency. The EUR slipped 70 pips vs. the Dollar to finish yesterday's trading at 1.3591. The EUR slid by a dramatic 200 pips vs. the JPY to 132.23. The 2 reasons for these results are the overvalued EUR/JPY as of late, and the safe-haven bullish JPY. The Japanese currency also experienced similar behavior against the Pound as fears grew yesterday. The EUR/GBP rate rose by a moderate 30 pips, as traders continue to weigh in on the health of the British and Euro-Zone economies.
In today's forex trading, traders are advised to follow economic news releases from the Euro-Zone and Britain closely as the results will help determine the bullishness of the Pound and EUR in today's trading. The most important news events from Britain are the release of the Manufacturing Production and Trade Balance figures at 8:30 GMT simultaneously. From the Euro-Zone, the most important news events are German Final CPI at 6:00 GMT and the speech by Budesbank President Axel Weber at 15:00 GMT. Forex traders are also advised to follow unexpected speeches by President Obama or Ben Bernanke, as this could have a strong impact on trading in the forex market for the main currencies.
JPY - JPY Gains Ground Versus Dollar
The JPY made moderate gains against the Dollar in yesterday's trading as there was panic when global stock markets made heavy losses as a correction may be under way, and as the banking system continues to be unstable. The Yen was also boosted by the weak Japanese economic figures, prompting investors to put money into the Yen. Thus the Yen returned yet again to the forefront as a safe-haven currency. This was compounded by HSBC announcing that despite high profits, the coming year will be a tough. This helped push down other banking stocks, and stocks such as Sony, Toyota, and Mitsui, as they also lost some ground in Monday's trading.
The Yen took nearly 100 pips away from the Dollar to close up 1% at 97.29. The JPY made large inroads into the EUR to close up nearly 200 pips at 132.23. The gains against the GBP were even more impressive at 250 pips to close at 147.08. This all comes about as the fears of economic uncertainty fail to disappear. Thus if there is a stock market correction in the coming weeks, then there is a likelihood that the Yen will continue its bullish trend in the medium-term. If this is the case, then within the next several days, the USD/JPY rate may hit below 96.00. As of today, traders are advised to follow the Current Account and Bank Lending data releases at 23:50 GMT.
Crude Oil - Oil Fails To Hit $60
Crude Oil yet again failed to hit the $60 mark as the commodity recorded a relatively flat session on Monday. It rose by a healthy 30 pips to $58.31 a barrel. Considering there was a global stock market slump yesterday, this was actually a good result. The reason why the price of Crude Oil continues to be solid lately is due to renewed investor's confidence that the developed world is starting to show signs of economic recovery. This in turn translates into industry growth and increased demand for oil.
In order for the price of Crude to continue its bullish run the main global economies will need to continue to show positive signs. However, if by the 3rd quarter this is not the case, then Crude may start to slide below $50 a barrel again. In the meantime, it is advisable to follow economic news coming out of the U.S., Japan, and China very closely in order get an accurate picture of which direction the global economic situation is heading.
Article Source - Forex Markets Steady as Stocks Dip
Key Overnight Developments
• Bernanke ‘Certain’ US Dollar Will Remain Global Reserve Currency
• Australian Lending for Property Investments Surges Most in Nearly 2 Years
The Euro rebounded a bit in Asian trading, testing above 1.36 once again but losing its grip on the figure ahead of the opening bell in Europe. The British Pound oscillated in a familiar 100-pip range below 1.5170 that has confined the pair over the past 24 hours.
Asia Session Highlights
US Federal Reserve Chairman Ben Bernanke sounded notably optimistic in a speech at Jekyll Island, Georgia, saying Wall Street’s response to bank stress tests was “encouraging” and that troubled financial institutions are now "way ahead" in raising capital. On the macro economy, the Fed chief said deflation risks are "receding" and an inflation rate at 1.5-2% is "appropriate". Speaking of the US Dollar, Bernanke said he is “certain” the greenback would remain as the world’s reserve currency.
In Australia, Investment Lending for property purchases surged 4.7% in March after falling -2.9% in the previous month, the largest upswing since June 2007. On the surface, the metric suggests that demand for big-ticket items is returning. Still, the data is not as encouraging as the headline figures would suggest. The cumulative monetary value of lending to real estate investors remains at the lowest level since 2002, coming in at just A$4.9 million as compared to the peak at nearly A$8 million when loans peaked in June 2007. If unemployment should rise to 6.75% this year and reach around 8% by 2010 as is being forecast by the National Australia Bank, housing demand may remain weak for the foreseeable future.
Euro Session: What to Expect
The UK Trade Balance deficit is set to narrow to -7.2 billion pounds in March from -7.3 billion in the previous month. The result is likely to owe more to a decline in imports rather than swelling cross-border demand. Even after excluding oil shipments to factor out the dramatic collapse in crude prices over the past year, exports have trended sharply lower since July 2008 and snapped a multi-year uptrend dating back to the beginning of 2004 in January. To that effect, an uptick in the headline external balance figure speaks of the timid consumer, not an improving trade environment. Lackluster overseas sales have weighed on manufacturing, a sector that tops the list of UK exports and employs 20% of the country’s workforce, with Industrial Production expected to post another record-setting drop at -12.8% in the year to March.
Separately, the Department for Communities and Local Government (DCLG) is likely to report that UK House Prices fell -13.0% in the year to March, the largest drop in at least 6 years. Rising unemployment and scarce credit access have kept buyers away from big-ticket purchases, sending property values lower. For those that already own a home, the decline amounts to a negative wealth effect, eroding the value of one’s assets to discourage spending and thereby keep a tight lid on economic growth. A survey of economists conducted by Bloomberg has estimated that the economy will shrink -3.7% this year.
Turning to the continent, the final revision of Germany’s Consumer Price Index is expected to confirm that inflation ticked up to 0.7% in the year to April from 0.5% in the preceding month. Currency depreciation and a holiday-linked spike in spending accounted for the increase: the Euro shed 2.1% on average against the currencies of Germany’s top non-EZ import partners, making imported goods comparatively more expensive for German consumers; meanwhile, the Easter holiday atypically fell on April as opposed to March this year.
Written by Ilya Spivak, Currency Analyst
Article Source - US Dollar 'Certain' to Remain Global Reserve Currency, Says Bernanke (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!