Positive Economic Data from the U.S. Pushes Up Dollar and Oil

The U.S. Dollar and Crude Oil experienced much bullishness in yesterday's trading. The Dollar reacted positively to decent existing Home Sales data and Timothy Geithner's optimistic speech regarding the U.S. economy. This helped the Dollar record a correction against most of its major currency pairs. Crude Oil also reacted positively to the news, helping the "black gold" extend its bullish run.

USD - Dollar Rises on Positive Economic Data

The Dollar rallied yesterday against most of its major counterparts after data suggesting the slowdown in the U.S. housing market has bottomed out gave support to the U.S. currency as a safe-haven. The Dollar has been sold off recently partially due to growing optimism about the outlook for the U.S. economy. The USD finished yesterday's trading session 150 pips higher against the EUR at the1.3819 level.

The major economic event that came out of the U.S yesterday was the Existing Home Sales data release. Home resales in the U.S. probably rose in April as foreclosure auctions and improved affordability spurred bargain hunters. Moreover, record-low mortgage rates, tax credits and falling prices may keep boost demand of unsold homes. In turn, a pickup in sales may help stem the slump in property values, which is key to shoring up household finances and construction as the economy begins to emerge from the recession.

The Dollar also extended its gains against the EUR yesterday after an auction of fresh five-year Treasury debt attracted solid demand, easing fears that U.S. deficits have soured foreigner's appetite for U.S. assets.

USD trading will be interesting today as important economic data is expected to be released. From 12:30 GMT a series of economic indicators will be released, starting with Core Durable Goods figures, Unemployment Claims and the New Home Sales. Surprisingly, almost all of these releases are expected to be higher than their previous figures, meaning the USD could continue to show further bullishness today. Traders should stay close to the market today, as there is a strong chance to capitalize on the fluctuations which will likely follow these releases.

EUR - The EUR Loses Momentum

The EUR lost momentum during yesterday's trading session, correcting the sharp gains against the Dollar and JPY seen last week. This was following comments by a European Central Bank policymaker suggesting further Interest Rate cuts could not be ruled out, and profit-taking after a rally last week hurt the European currency. By yesterday's close, the 16 nation currency fell sharply against the USD, pushing the oft-traded currency pair to 1.3819. The EUR experienced similar behavior against the JPY and closed at 1.3300.

However, the Pound Sterling was the biggest mover amongst the majors, propelled higher by receding pessimism about the UK economy and financial sector. This was boosted by a general move into riskier assets as equity markets rose after a pick-up in U.S. consumer confidence. The Pound outperformed the EUR, hitting $1.60 for the first time in almost seven months as investors continued to pare back the large bets against the currency built up after the collapse of Lehman Brothers last year.

Looking ahead to today, the most important economic indicator scheduled to be released from the Euro-Zone is the German Unemployment Change at 8:00 GMT. Analysts are forecasting this figure to slightly increase from its previous reading. Traders will be paying close attention to today's announcement as a stronger than expected result may boost the EUR in the short-term. Traders are also advised to follow the CBI Realized Sales figures coming out of Britain at 10:00 GMT, and the Unemployment Claims figures coming out of the U.S. at 12:30 GMT as these results may set the EUR's main currency crosses going into next week.

JPY - Yen Experiences Mixed Results against the Majors

The Yen completed yesterday's trading session with mixed results versus its major currency pairs as investors chose the Dollar over the Yen for a safe-haven trade. The JPY fell against the USD and closed around 95.25. However, the Japanese Yen rose almost 40 pips versus the EUR, closing at 133.00.

The major economic event that came out of Japan yesterday was the Retail Sales figures. Retail Sales fell for an eighth month in April as worsening job prospects and declining wages deterred shoppers. The deep recession is spreading to households, whose outlays account for more than half of the economy. Japan will struggle to return to a sustainable growth path as long as companies from Toyota Company keep cutting jobs to minimize losses.

Crude Oil - Crude Oil Approaches the $63 Price Level

Crude Oil prices experienced another day of appreciation as the oft-traded commodity nearly hit $63 during yesterday's trading session. This has been compounded by a weaker Dollar in recent weeks, causing investors to flee to commodities such as Crude Oil. Furthermore, if the U.S. continues to publish more positive economic news, and if the American government continues to be aggressive in tackling the current financial crisis, then Crude prices may hit $75 by the 4th quarter of 2009.

Expectations that consumers may once again want more Oil when the recession bottoms out have also fueled the rally, with traders watching the stock market for economic telltales. There is a reasonable possibility that Oil prices will continue to be bullish going into next week, providing that the economic situation of the leading economies continues to rapidly improve.

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German Unemployment Estimates May Come Out Worse Than Expected (Euro Open)

Germany’s ILO Unemployment estimate will be watched tomorrow, but may surprise to the upside as the country unexpectedly returned to a deflationary stage during this month. Sentiment data will be released tomorrow for a month in which an easing surge in global equities saw stocks teeter in a ranging environment.

Key Overnight Developments

• Pound Fails to Sustain 1.60 Break
• Japanese Retail Sales Advance For A First Time Since August
• New Zealand Fiscal Budget Reveals Record Deficit

Critical Levels

The British Pound sold-off by as much as 150 pips after breaking through the key 1.60 mark, failing to sustain a perceived break-out rally. Euro continued to add to its losses against the U.S. Dollar after inflation data showed that Germany suffered from deflation during May, adding to expectations that the European Central Bank may be required to act more aggressively in stimulating the economy.

Asia Session Highlights

Japan's Retail Trade data advanced for the first time since August during April, a period which saw Consumer Confidence among Japanese consumers rise by the largest amount since July 2004. Indeed, the figure rose 0.6%, ahead of expectations calling for the number to rise just a tick lower than the realized figure. The broader total store sales jumped by 5.9%, the most since October 2007. Surprisingly, Motor Vehicle sales was one of the strongest performing sub-sectors of the metric, advancing 7.4%. These stunning developments lead one to wonder what it is that may be driving such renewed spending habits. Japan currently suffers from continued economic deterioration and advancing labor market weakness. But as noted above, Consumer Confidence advanced by the most since July 2004, a move which may have come on the back of surging global equities.

Central bankers throughout the world are extremely aware of acting too slowly to curb "extraordinary" liquidity-easing measures, said the Reserve Bank of Australia's Deputy Governor Ric Battellino in Sydney today. Indeed "the high state of awareness that currently exists about the risk of being too slow to reverse recent exceptional measures" is likely to "limit the probability of such a mistake being made," Battellino said. Despite these cautious warnings, it's still too early to decide whether aggressive policy measures have been effective.

New Zealand Minister of Finance Bill English unveiled that the National Party's first fiscal budget since taking power last year. English revealed a 2009-2010 budget deficit of NZ$11.87 billion ($7.3 billion), more than that which was expected. In his accompanying statement, the finance minister revealed a set of forecasts. The economy will fall by 1.7% in the year through March 2010, but will expand 1.8% in the 12 months through 2011. To finance many of the projects announced, the treasury will sell NZ$50 billion in bonds over the next four years. Negative and slowing growth, accompanied by expansive spending, will see the debt-to-GDP ratio rise by as much as 43% by 2017. These measures are a massive effort to "keep the economy going through the recession" by "supporting jobs, safeguarding entitlements, improving public services and building more infrastructure," English's plan said. Moments after the speech, Moody’s Investor Service said that the island nation’s debt load is of some concern, but that their Aaa credit rating would continue to remain stable.

Euro Session: What to Expect

Germany’s ILO Unemployment Rate estimate for April is expected to rise for the fifth straight month. The forecast 0.1 percentage point uptick in the figure may be understating the potentially weak start that the German economy has had for the second quarter. Just yesterday we saw consumer price data unexpectedly revert to a deflationary phase. These developments may have come as layoffs in the world’s fourth-largest economy took an unprecedented toll in the month. Despite this decline inflation the Unemployment Change estimate predicts that an additional 64,000 jobs were created in May.

Switzerland’s Trade Balance may fall into deficit territory in April after two-consecutive months of inching toward the area where imports exceed exports. Unexpected labor market strength during the first quarter may contribute to increased consumption from abroad. Estimates had forecast the level of employed to have fallen by 0.1% in the first three months of the year when in reality, the level actually increased by 0.8%. As such, the current surplus in foreign trade may actually turn to a deficit.

Euro-Zone Consumer Confidence is expected to rise for a second straight period after having fallen six consecutive months prior. The minuscule surveyed uptick may fall short of that. At least, on the business front, we saw that enterprise managers saw the current assessment of the economy as being worse in May than they did in the month prior.

Written by Luis Gil, DailyFX Research
Article Source - German Unemployment Estimates May Come Out Worse Than Expected (Euro Open)
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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!