6.09.2009

USD Quivers from Chrysler-Fiat Ordeal

After gathering some positive momentum at the end of last week from US employment data, the US Dollar now faces a new ordeal. As the US Supreme Court attempts to block the sale of Chrysler to Fiat, recently gained confidence in the US economy has begun to show signs of wear. Forex traders may see added volatility to a market that was forecast yesterday to be flat. News events such as this tend to push markets in a way which traders can greatly benefit.



USD - Chrysler Sale Delay Weighs in on Dollar

The Dollar moved on a number of factors in yesterday's trading. One of the most important of these was the sale of Chrysler being blocked by U.S. Supreme Court. President Obama fears that this could kill the deal if the issue is not resolved in the nearest time. If this did happen, the effects on the U.S. economy may be disastrous. In turn, the Dollar may plummet as people could lose confidence in the American economy. In the meantime, forex traders are also trading on other issues, such as Obama's plan for economic recovery.

The Dollar rose against most of its major currency pairs yesterday, as Obama unveiled his plan to create new jobs, and tackle rising unemployment. The EUR/USD finished Monday's trading lower by nearly 100 pips at the 1.3886 level. The USD also rose about 80 pips against the CHF to close at the 1.0934 level. However, the USD lost ground against the British Pound, as optimism returned to Britain, after the opposition Conservative party faired well in the European elections. The GBP/USD cross finished higher at 1.6024.

Today, U.S. Treasury Secretary Timothy Geithner is set to be asked about the TARP (Troubled Asset Relief Program) repayments and forecasts for U.S. economic recovery in a Senate hearing at around 14:30 GMT. It would be a wise move for forex traders to open up their USD positions both prior to and after this major news event, as the market is set to be very volatile throughout today's trading.

EUR - German Industrial Orders Data Pushes Down EUR

Optimism spread through the Euro-Zone following the release of the German Industrial Orders Data. Even though the results were in line with forecasts, this showed the first major sign of stabilization in the Euro-Zone economy. Additionally, March's figures were revised from 3.3% to a significantly improved 3.7%. However, this led to investors to go short on the EUR in some cases, as traders decided to take risks. Furthermore, many of these traders returned to other currencies, such as the USD and GBP.

Other factors also helped push down the EUR against the major currencies yesterday. These include optimism returning to the British Pound, as the British Conservative Party fared well in the European parliamentary elections and recent reports showed British housing market stabilization. This sparked hope that PM Gordon Brown's unpopular government will soon collapse.

The EUR/GBP rate tumbled by 85 pips to close at the 0.8660 rate. This alone was owed to great optimism from Germany's economy. The EUR/USD pair finished Monday's trading lower by nearly 100 pips at the 1.3886 level. The EUR/JPY finished lower by 120 pips at 136.51, reversing recent gains for this pair.

There are several factors that are likely to dominate EUR trading later today. Firstly, the Euro-Zone's reaction to recent statements by the IMF (International Monetary Fund) to fix the banking system in the 16-nation region. Secondly, the release of the publication of the results of the German Industrial Production indicator at 10:00 GMT. Thirdly, U.S. Treasury Secretary Timothy Geithner's speech at 14:30 GMT.

JPY - Yen Extends Gains against US Dollar

The Yen extended its gains against the Dollar yesterday, as optimistic results from Japan's M2 Money Stock and Economy Watchers Sentiment indicators led to a relatively strong JPY against most of its major currency crosses in yesterday's trading. The USD/JPY finished lower by 20 pips at 98.27. The EUR/JPY cross finished lower by 120 pips at 136.51. However, the JPY lost over 50 pips against the GBP to close at 157.44.

Looking ahead to today, the forex market is set to be very volatile, as the whole developed economies look to U.S. Treasury Secretary Timothy Geithner's speech at 14:30 GMT. In late trading today, the Yen is also likely to be affected by the release of the Japanese Core Machinery Orders data at 11:50 PM GMT. Forex traders are advised to open their JPY positions now, as the markets are set for a volatile trading day.

Crude Oil - Crude Gains 1% on Krugman Remarks

Yesterday, Crude Oil gained 1% or 56 cents to close at $68.46. This was following remarks made by the Nobel Prize Winning economist Paul Krugman. He stated that the U.S. recession could end later this year. As a result, this signaled higher energy demand. This could be a ripe possibility as developed countries are continuously showing improved economist results each week.

The price of Crude may hit $70 a barrel in trading later today, if signs from the U.S. and global economy are positive. At the forefront of this will be U.S. Treasury Secretary Timothy Geithner's speech at 14:30 GMT. Additionally, traders are advised to follow statements by U.S. and European leaders, as they could add to volatility in the market.

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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.

Currencies

Currencies
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!