USD - ADP Non Farm Employment Report on Tap - Will USD Weakness Continue?
The dollar dropped against most of its major currency rivals yesterday, as strong U.S. housing sales data reinforced optimism about the health of the global economy, sapping safe-haven demand for the greenback. All good news aside, by yesterday's close, the USD fell sharply against the EUR, pushing the oft-traded currency pair to 1.4310. The dollar experienced similar behavior against the GBP and closed at 1.6588.
The dollar had begun the day staging a modest recovery after Monday's steep drop, but the trend changed quickly as U.S. stocks turned higher, helping to renew the recent rally in higher risk currencies. Analysts said the dollar's failure to recover shows that investors are convinced the we have seen the worst of the global crisis, and only have room to improve, which is encouraging them to buy higher risk currencies and assets.
A leading indicator released yesterday was the Pending Home Sales report. The figure saw its biggest monthly gain in 7.5 years which indicated that the U.S recession was easing. However, it failed to provide strength to the Dollar as investors may be waiting for key data due to be released today to implement their trading strategies.
Looking ahead to today, the most important economic indicator scheduled to be released from the U.S. is the ADP None-Farm Employment Change at 12:15 GMT. Analysts are forecasting this figure to decrease from its previous reading. Traders will be paying close attention to today's announcement as a stronger than expected result may boost the USD in the short-term. Traders are also advised to follow Federal Reserve Chairman Ben Bernanke's testimony at around 14:00 GMT. This testifies is very important as it is very likely to Impact the Dollar volatility. Traders are advised to watch closely, as this is likely to set the pace of the Dollar going into the rest of the week's trading.
EUR - Will the EUR Hold its Recent Gains?
The EUR was affected by two main things in yesterday's trading; the global stock market rally and mixed feelings ahead of Thursday's Interest Rate decision by the European Central Bank (ECB). The U.S. stock market rally led investors to buy-back into the EUR, and dropped the Dollar, as investors looked for returns on risky investments in Tuesday's trading.
The EUR appreciated by around 120 pips versus the USD to close at 1.4300 in yesterday's trading. The EUR/GBP pair closed almost unchanged at 0.8631 ahead of Thursday's Interest Rate decisions for both the Euro-Zone and Britain. Overall, the EUR, which for the last few months has been sold by most traders, is seeing these sell-positions unwind and is now making a small recovery. The question now is can EUR bullishness continue versus the Dollar?
Sentiment in the Euro-Zone economy has brightened in the past week following better-than-expected news. The EUR is showing signs of resilience even though there was volatility throughout non-Euro crosses. It will be crucial for traders to identify how the preceding economic indicators from the U.S., Japanese, and other key economies will affect their positions.
JPY - Yen Experiences Mixed Results against Major Currencies
The Yen completed yesterday's trading session with mixed results versus the other major currencies. The JPY was broadly unchanged versus the EUR yesterday and closed its trading session at around the 136.60 level. The JPY also saw bullishness against the USD as it jumped around 70 points and closed at 95.70.
The Bank of Japan needs to keep an eye on the global economy as the Japan's finance minister, Kaoru Yosano, said the country's worst post-war recession has already hit bottom. But a full recovery might not come until early 2010 as manufacturers gradually lift output from very low levels.
Traders today have very little fundamental news emanating from Japan as the only indicator being released is the capital spending report. Analysts forecast the figure to decrease from its previous reading. This indicator typically generates small amounts of volatility. However, the GBP and the USD appear to be clutching the reins of today's market. Traders would be wise to note its future direction as it usually carries a heavy impact on the other currencies.
Crude Oil - Traders Await Crude Oil Inventory Report
Crude oil rebounded from the day's lows, finishing little changed at $68.20, as the dollar weakened against the EUR, bolstering the appeal of commodities as an alternative investment. Oil prices have risen every day since May 21 on snips of moderately good news from manufacturers, home builders and the U.S. government.
Today, the release of crude oil inventory is likely to help determine the market's next direction for Black Gold. Oil inventories have fallen in each of the previous three reports from the Energy Information Administration but remain close to an 18-year high. The result of this was a dramatic increase of commodity prices. A release of a string of positive economic figures could help continue its bullishness. Therefore, traders are advised now to make some profits as the price of Crude Oil is set to remain volatile in the short-medium term.
Article Source - U.S Economy Awaits ADP Non Farm Employment Figures
Key Overnight Developments
• UK Consumer Confidence Expands For Second Month in May
• Australian Dollar Surges As Economy Unexpectedly Grows in Q1
The Euro was confined to a narrow range in overnight trading, oscillating in a 60-pip band above 1.4270. The British Pound followed suit for most of the session but prices surged higher to breach the 1.66 level just ahead of the opening bell in Europe.
Asia Session Highlights
UK Consumer Confidence expanded for a second consecutive month in May, according to Nationwide. The metric printed at 53 in May after a revised 51 result in April, the first print above the 50 “boom-bust” level since December 2008. The details of the survey revealed that 57% of respondents expect jobs to remain scarce and only 28% see the economy turning worse six months from now, the lowest percentages since October of last year. Stock market gains and moderating house-price losses likely accounted for the improvement in consumer sentiment: the benchmark FTSE 100 index has added over 30% since early March while house prices rose for the fourth consecutive month in May.
The Australian Dollar surged against major currencies after the economy unexpectedly grew in the first quarter. Gross Domestic Product expanded 0.4% in the three months to March; economists had expected the metric to shrink -0.2%. In annual terms, the GDP growth rate fell to 0.4% from a revised 0.8% in the final quarter of 2008. The result bolsters RBA Governor Glenn Stevens’ argument that Australia will weather the current global downturn better than other industrialized countries. Looking at the details of the report, consumption grew 0.5% and the external balance improved 1.4%. Private and government investment both declined. Aggressive stimulus measures are likely behind the impressive outcome: the central bank has brought interest down to the lowest in 49 years while the government has started to distribute more than A$12 billion in cash handouts to boost spending.
While the result is certainly encouraging, the important question going forward will be if Australia is able to sustain positive momentum once government stimulus dries up. Earlier today, the Treasury’s macroeconomics director David Gruen said he expects a “delayed” economic recovery in testimony to the a Senate committee but added the economy will grow at an annual pace of 4% in 2013-2017. Yesterday, the central bank kept interest rates unchanged at 3% for the second consecutive month but warned that additional easing may be needed given the prospect of medium-term deflation. Following the report, Australian Prime Minister Kevin Rudd and Treasurer Wayne Swan offered their rendition of the “good cop, bad cop” routine: Swan boasted that Australia outperformed other advanced economies and called the GDP figures a “very strong outcome”; meanwhile, Rudd said that the economy was “not out of the woods yet” and cautioned that there is “no guarantee” that the economy will not contract in coming quarters. A reserved outlook appeared to win out, with Swan conceding that Australia has yet to feel the full impact of the global recession.
Euro Session: What to Expect
The second revision of Euro Zone Gross Domestic Product is expected to confirm that the currency bloc’s economy shrank -2.5% through the first quarter, the largest drop since the creation of the single currency. The outlook going forward is decidedly ominous: a survey of economists conducted by Bloomberg expects inflation-adjusted GDP to shrink by a whopping -4.2% this year, greatly overwhelming calls for a -2.8% drop in the United States. Looking further out to 2010, the onset of economic recovery is set to see GDP growth in the States outpacing that of the Euro region by 1.4%. On balance, this suggests the European Central Bank is likely to lag behind the US Federal Reserve in raising interest rates as the rebound materializes, hinting at a bearish long-term bias for EURUSD.
Indeed, the ECB has been notably more reserved than most of its major counterparts in offering monetary stimulus. Although ECB President Jean-Claude Trichet announced that the bank would move forward on quantitative easing with a scheme to “purchase euro-denominated covered bonds issued in the euro area,” details of the program (and thereby its actual commencement) have been delayed at least until the next policy meeting on June 4th. Such waffling may see the single currency punished in the weeks and months ahead as traders price in not only a longer path to recovery but also the political implications of inaction. Indeed, grumbling electorates are increasingly likely to entertain calls to free national monetary capabilities from the ECB’s “measured approach” as recession deepens and unemployment levels rise, threatening the very existence of the currency union itself.
Separately, Euro Zone Producer Prices are set to fall -4.5% in the year to April, the most in over 28 years. Easing wholesale inflation will compound downward pressure on consumer prices from slowing economic growth as lower production costs are passed on via cheaper finished goods, threatening the region with the onset of deflation. Such a scenario stands to commit the Euro area to long-term stagnation as consumers and businesses perpetually hold off on spending and investment, waiting for the best possible bargain.
In the UK, May’s Services PMI is expected to print at 49.5, rising from 48.7 in the previous month. The reading suggests the sector shrank for the 13th consecutive month, albeit at a slower pace.
Written by Ilya Spivak, Currency Analyst
Article Source - Euro Zone GDP to Confirm Economy Shrank at Record Pace in First Quarter (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.
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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!