USD - Dollar Losses Strength at All Fronts
Last week, the Dollar continued its bearish trend against all the major currencies, and the EUR/USD saw a six month high, as the pair was traded at the 1.4150 level.
Last weeks publications from the U.S economy were characterized with contradicting indications. While some showed that the public has retained its faith in the U.S economy, others have shown that it is still early to say that the crisis is behind us. And it appears that until sharp evident will sign the end of the crisis, the Dollar's bullishness could continue.
The main news from the U.S last week were the Consumer Confidence, which delivered a surprising positive result, providing the best figure in 8 months. However, the weekly Unemployment Claims remained above 600K for the 17 consecutive times. This number is simply overwhelming. In addition, the New Home Sales report, which is considered to be one of the most reliable indicators regarding the housing sector, showed a rather disappointing figure, as only 352K new single-family homes were sold during April.
As for the week ahead, a batch of data is expected from the U.S economy, and this could be a fantastic week for traders to enjoy the heavy volatility of the market in order to enlarge their profits. Special attention should be given to the Non-Farm Employment Change expected on Friday, as this indicator tends to have an immense impact on the leading currencies and on top of them the USD. Currently it seems that if the actual result will be similar to forecasts of 520K, a reverse of trends could take place by the weekend.
EUR - EUR Soars on Positive German Data
Last week, traders who went long on the EUR made some significant profits. The EUR saw rising trends against the USD, the GBP and the JPY, as its most impressive uptrend was against the Dollar.
The two main news events from the Euro-Zone last week came from the German economy. Germany holds the largest and strongest economy in the Euro-Zone, and thus the relevant publications from this economy usually have a hefty impact over the EUR.
On Monday, the German Business Climate report was published, and even though it failed to reach expectations, the result was still the best figure in 6 months, showing that businesses around Germany are starting to feel improvement in their current business conditions. Then on Thursday, the German Unemployment Change indicator showed that merely one thousand individuals have lost their jobs during April. This was the best figure in 6 months as well. The combination of the two surveys seems to be 1 of the main reasons that strengthened the EUR against the major currencies.
Looking ahead to this week, the most notable publication from the Euro-Zone will be the Minimum bid Rate, which is of course the European Interest Rates announcement. Currently, analysts suspect that the European Central Bank (ECB) will leave interest rates at 1.00%, however, in case that the ECB will decide to manipulate rates, this will sure have a high impact on the EUR.
JPY - Mixed Signals from the Japanese Economy
During last week's trading session, the Yen saw mixed result against the leading currencies. Whilst the JPY depreciated against the EUR and the Pound, it saw rising trends against the USD.
The leading indicators which were published from the Japanese economy showed mixed signals that could explain the large volatility of the Yen. The Japanese Trade Balance, which measures the difference in value between imported and exported goods during April, delivered an unexpected negative figure, making it the ninth month in a raw on which Japan sees more importing activity than exporting. These figures are devastating for the Japanese economy, which is built on its export. On the other hand, The Preliminary Industrial Production showed an increase of 5.2% in April as opposed to March. This means that the Japanese consumers feel more secure in their economic condition, and this has the potential of pulling the country out of recession.
Ad for this week, traders should pay special attention to the Capital Spending report, scheduled for Wednesday. This report measures the change in the total value of new capital expenditures made by businesses, and is expected to show a 27.1 decrease in the last quarter. If the real result will be similar, a bearish trend for the JPY could take place.
Oil - Crude Oil Breaches the $67 line.
Crude Oil is traded near six month high as a barrel of Crude Oil is currently valued for over $65.
Crude Oil was boosted from the weak Dollar, as many other commodities such as Gold reacted in similar ways to the weakening USD. The one thing that these commodities have in common is that they are all valued in Dollars, and as such, when a dramatic change in the Dollar value itself takes place it usually has an immediate impact on commodities such as Crude Oil as well.
In addition, it seems that the summer is supporting oil's prices as well. As the vacation season begins, more and more air flight companies which were under the risk of filing for bankruptcy, are reporting higher than expected profits, stimulating them to expand their business activity, and therefore dramatically elevate the demand for oil. For as long as demand rises, and the USD depreciated, the prices of Crude Oil could reach higher, maybe even $70 a barrel.
Looking ahead to this week, traders should follow the main news from the U.S economy, as the changes of the Dollar will surely continue to dominant oil's fluctuations. And if the USD will expand its free fall, don't be surprised if a barrel of oil will reach $70.
Article Source - High Volatility might continue this Week
Key Overnight Developments
• Australian Manufacturing Shrinks at Slower Pace, Retail Sales Rise
• Risky Assets See Boost as Chinese Manufacturing Expands for Third Month
The Euro was confined to a familiar range in overnight trading, oscillating in a 60-pip band above the 1.41 level. The British Pound trended gently upward, testing as high as 1.6245 before retreating back to the 1.62 mark. The US Dollar saw heavy selling pressure overnight as China’s manufacturing sector expanded for the third consecutive month in May, boosting stock markets on hopes that the Asian giant would reignite global demand, but prices retraced ahead of the European trading open.
Asia Session Highlights
Australia’s AiG Performance of Manufacturing Index rose to 37.5 in May, the highest in seven months, rebounding from a record low at 30.1 registered in the preceding month. The reading remains below the 50 “boom-bust” level, suggesting that manufacturing continued to shrink but at a slower pace. Looking at the details of the report, the Production and New Orders components of the metric saw the most improvement while Inventories and Input Prices fell. This is cautiously encouraging news for the sector that employs over 21% of Australia’s labor force: rising orders and depleting inventories suggest firms are seeing a bit of a pick-up in demand, feeding hopes of eventual stabilization in employment and consumption.
Australian Retail Sales continued to trend broadly higher: although receipts added a bit less than expected on a month-to-month basis (0.3% vs. 0.5% forecast), annualized sales grew 6.8% in the year to April, the most since January 2008. Retail activity is likely being supported by fiscal stimulus: the government has provided every Australian with A$950 in cash handouts since March. Sales of household goods outperformed, rising 3.9%. Although consumers’ willingness to commit to bigger-ticket purchases is heartening, it remains to be seen if momentum can be maintained after the fiscal boost is exhausted. Indeed, continued weakness in discretionary spending suggests Australians view the handouts as temporary relief and reflect expectations of lower spending power in the future.
Still, the antipodean economy is hardly out of the woods. TD Securities’ inflation estimate revealed that the annual pace of price growth fell to 1.5% in May, the lowest reading on record, while Company Operating Profits fell much more than economists expected in the first quarter, shedding -7.2%. This highlights that while the pace of decline may moderate over the coming months, a meaningful return to vibrant growth and employment is farther out on the horizon. Indeed, the economy is expected to continue to shrink through the end of this year with a modest rebound seen in the first quarter of 2010.
Euro Session: What to Expect
The UK Purchasing Manager Index is set to show that manufacturing contracted at a slower pace in May, rising to 44.0 from 42.9 in the previous month. On balance, only a print above the 50 “boom-bust” level is likely to have any substantial impact on the British Pound with sector weakness having been priced in for some time now. The data is most likely going to take a back seat to risk trends: US equity index futures are trading higher ahead of the opening bell in Europe suggesting risky assets will continue to advance, threatening safety-linked currencies (most notably the US Dollar) with continued selling pressure.
Written by Ilya Spivak, Currency Analyst
Article Source - US Dollar Sees Selling Pressure as Chinese Data Boosts Risk Appetite (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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Good luck to everyone!