USD - USD Advances after Treasury Auction
The Dollar advanced Wednesday against the EUR and JPY after an auction of 10-year U.S. Treasury notes achieved higher than expected yields. Selling off of stocks after the auction intensified the losses among risk-sensitive currencies. The USD fell earlier after Russia's central bank said it will diversify its currency reserves by cutting U.S. Treasury purchases and buying IMF-backed bonds.
The Dollar also fell 6.6% versus the EUR in May on speculation the ever expanding U.S. budget deficit and the Federal Reserve's increase of the money supply will undermine the greenback. The U.S. budget deficit climbed to $189.7 billion in May, a record for the month which prompted some concerns of the Dollar's collapse. In light of this, it appears that U.S. fiscal and monetary policy will provide indications on the outlook for the Dollar as markets currently associate an improving economic outlook with a possible tightening of monetary policy.
A Federal Reserve survey know as the "Beige Book" which was released Wednesday showed that economic conditions remain weak and even deteriorated in several regions of the country, with commercial real estate and labor markets continuing to struggle. Traders should pay close attention to Core Retail Sales and Unemployment Claims to be released today at 12:30 GMT for further insight in to the state of the U.S economy. The likelihood that the greenback will continue to rise against some of its main currency rivals appears stronger than usual today.
EUR - EUR Trims Losses against USD
After a downward turn against the USD, the EUR rebounded from its session low of $1.3914 and trimmed its losses following a rise in the equity markets. Wednesday the EUR ended at $1.3987, down from $1.4075 late Tuesday and at 137.47 Yen, up from 137.10. The Pound Sterling was at $1.6355, up from $1.6333. The Pound advanced against the EUR to the highest level since December after a government report showed manufacturing in the U.K. expanded for a second consecutive month and stocks gained.
The EUR/USD pair seems to have settled into a trading range with the EUR fluctuating between $1.38 and $1.42. This trend is likely to continue until the end of the week. However, with high oil prices and diminishing risk aversion it is likely that the EUR will resume its bullish trend as the underlying sentiment is still negative for the Dollar.
With a slow news days for the Euro-Zone today and Friday, investors are waiting for the weekend G8 meeting to start this Friday for a better assessment of the direction the participating economies will take. The EUR's recent strength makes it a excellent forerunner in today's market, but regional uncertainties have captivated traders lately and made the forex market less predictable.
JPY - JPY Trading Down against Currency Rivals
The JPY declined yesterday against most major currencies as speculation regarding a global recovery encouraged investors to buy higher yielding assets outside of Japan, selling the Japanese currency. The Yen was at 137.21 per EUR Wednesday and at 98.21 per USD, following a 0.8% drop. As the anxiety about financial turmoil retreats, people are willing to buy riskier currencies which offer higher yields while funding that with safer currencies such as the Yen and the Dollar.
The Japanese Yen is likely to continue to weaken as improving risk appetite brought on by advances in the Asian stock market is likely to encourage investors to turn to overseas assets offering higher returns, promoting Japanese capital outflows. As a result, the JPY's target rates today should be lower against its currency counterparts.
Crude Oil - Oil Soars above $72 a Barrel
Crude Oil rose to a 7-month high after a government report showed that U.S. crude supplies unexpectedly fell. Stockpiles of oil dropped 4.38 million barrels to 361.6 million in the week ended June 5, the Energy Department said Wednesday. Crude Oil for July delivery rose to another record price this morning by reaching $72.04 a barrel.
Oil demand is still pretty weak across the globe despite a slight increase in demand in the U.S. Commodity futures which have increased this year as the Dollar weakened and equity markets rebounded. Still, the fundamentals don't support prices at these levels and Oil's current strength might be a result of momentum-trading as investors turn to higher yielding assets amid rising confidence of global recovery. Fears over rising inflation may also assist in Crude Oil's rise as investors look for assets that can offer protection against rising inflation.
Article Source - EUR and USD in Struggle for Dominance
Key Overnight Developments
• Japan’s GDP Shrank At Record Annual Rate in The First Quarter
• Australia’s Labor Market Worse Than Headline Data Would Suggest
The Euro advanced in overnight trading, adding as much as 0.5% against the US Dollar. The British Pound followed suit, rising 0.4% against the greenback.
Asia Session Highlights
The Australian Dollar surged in overnight on news that the economy shed just -1.7k jobs in May versus expectations of a -30k decline. Looking at the details of the report, however, the labor market does not seem nearly as healthy as the headline figure would suggest. The economy actually lost 26.2k full-time jobs while gaining 24.5k part-time positions, a shift that implies shorter working hours and lower wages, darkening the outlook for spending. Although consumer confidence jumped higher in June, the result likely owed to the Prime Minister Kevin Rudd’s generous stimulus measures and sentiment may reverse course going forward as the flow of government cash dries up. The Unemployment Rate jumped to 5.7% as expected, reversing the April’s improvement to 5.5% and returning to the 5-year high registered in March. Economists polled by Bloomberg expect the jobless rate to continue to rise for the foreseeable future to top 7% by the first half of next year. If this indeed proves to be the case, Australia’s heretofore much-lauded ability to outperform other industrial economies may falter.
The final revision of Japan’s first-quarter Gross Domestic Product showed the economy contracted less than initially estimates suggested, shrinking -3.8% versus -4.0% expected. Still, the annual pace of decline continued to accelerate, printing at -14.2% from -13.5% in the three months to December 2008, setting a fresh record low. While the pace of decline may moderate in the coming months as firms replenish depleted inventories, the dismal outlook for global demand in the foreseeable future will mean that a robust recovery will remain elusive for the time being as output and employment levels remain at the lower end of the spectrum. Indeed, the current account surplus shrank more than expected in April as overseas sales tumbled -40.6%.
Euro Session: What to Expect
June’s edition of the European Central Bank Monthly Report is the only item of significance on the economic calendar for the upcoming session. The document is unlikely to offer much by way of new insight beyond what was revealed at the last monetary policy meeting. Other factors may stir Euro volatility however, as a proposed EU-wide financial regulation scheme threatens to stoke a backlash against the ECB while a currency crisis continues to loom in Latvia, warning of potential contagion. A failed bond auction has seen the Balkan country scramble to cobble together an IMF-backed rescue package to avoid a massive depreciation of the local currency. Western European banks are heavily invested in Latvia as well as neighboring Lithuania and Estonia; if the currency collapses, the value of Western European investments in the region will go with it, putting intense strain on lenders already battered by losses from the subprime crisis. Needless to say, such a scenario could weigh heavily on the Euro as traders seek to distance themselves from the turmoil.
Written by Ilya Spivak, Currency Analyst
Article Source - Euro Weakness Looms on Latvia Currency Crisis, EU Regulation Scheme (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.
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!