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.
Article Source - Positive Economic Data from the U.S. Pushes Up Dollar and Oil
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
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)
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.
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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.
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Why to trade on Forex?
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Good luck to everyone!