6.15.2009

Dollar Up as Russia Sees No Other Alternative to the U.S. Currency

The EUR came under selling pressure against the greenback on Monday after the UK Daily Telegraph reported on its website that Germany's top industrial group has warned that Germany's credit crunch is deepening. The dollar also drew some support after Russia's Finance Minister said the nation has full confidence in the U.S. currency. His remarks came ahead of the first summit of leaders of Russia, China, India and Brazil on Tuesday, at which the leaders are expected to discuss issues including foreign reserve diversification.



USD - USD Finished Volatile Trading Week

Last week marked an extremely volatile trading session for the dollar, especially against the EUR and the Yen, enabling traders to make profits from going both long and short against the greenback. However, against the GBP and the CHF the USD dropped significantly.

It seems that mixed results from the leading economic indicators that were published last week have contributed to the volatility of the dollar. The most positive publication for the USD was the U.S Retail Sales index, which showed that the total value of sales at the retail level has increased in May for the first time in 3 months. However, the U.S Trade Balance continued to show negative balance between imported and exported goods and services, and during April, it even failed to reach expectations showing a significantly lower figure of -29.2B. Another disturbing publication was the Federal Budget Balance report which showed that during May the U.S. government's spending was 189.7B higher than its income. This information proofs once again that it indeed might be premature to assume that the worse oof the economic crisis is already behind.

As for the week ahead, many interesting publications will provide the traders vast opportunities to increase their equities. First of all, today at 13:00 GMT, the TIC Long-Term Purchases report will be released, and is forecasted to deliver the best result in 7 months, what should strengthen the dollar. Also this week, the monthly Building Permits and the weekly Unemployment Claims will be announced, while forex traders are advised to follow these reports as they're expected to have a large impact on the USD.

EUR - Has the EUR already exhausted its Bullish trend?

The EUR saw mixed results against the major currencies during last week's session. The EUR mainly saw volatile activity against the dollar, yet it sharply dropped against the Pound, and significantly rose against the Yen.

It seems that the EUR's instability came as a result of some disturbing figures published from the leading economies in the Euro-Zone. The German Factory Order index showed that the total value of new purchase orders in Germany in April has remained in the same low level as in March. Moreover, French Industrial Production report reflected a drop of 1.4% during April, as opposed to March. The Industrial Production in the entire Euro-Zone has dropped as well, and by 1.9%, making it the 8th consecutive drop in the Euro-Zone industrial production.

As for the week ahead, a few intriguing economic indicators will be published from the Euro-Zone, especially from the German economy. On Tuesday, the German ZEW Economic Sentiment will be delivered. This is a survey of about 350 German investors and analysts which asks respondents to rate the next six months economic outlook for Germany. Also this week, the German Producer Price Index is scheduled for Friday. Investors are paying a great deal of attention to this indicator because it considered being one of the leading inflation gauges. Therefore, the leading currencies and especially the EUR are likely to be affected by its results.

JPY - Yen continues to weaken against the majors

Last week the Yen continued its bearish trend as it continued to slide primarily against the GBP and the EUR, and underwent a volatile session against the dollar.

The Japanese economy continued to deliver negative notifications during last week trading. The monthly Core Machinery Orders, a report which measures the total value of new private-sector purchases orders placed with manufacturers for machines, has dropped by 5.4% in May as opposed to April. In addition, the Final Gross Domestic Product (GDP), the broadest measure of economic activity and the primary gauge of the economy's health, has dropped by 3.8% in the last quarter, completing a 4 consecutive quarters of negative figures. It is quite clear that these results demonstrate the continuation of the gloomy condition of the Japanese economy. And it seems that for as long that the Japanese economy won't begin to deliver positive signs, the Yen is likely to continue its freefall.

Looking ahead to this week, the most important publication from the Japanese economy will take place on Monday night as the Bank of Japan (BoJ) will announce the Interest Rates for June. Given the fact that Japan already has the lowest Interest Rate in the industrial world, 0.10% only, it's not likely that another Interest Rate cut will take place. However, if the BoJ will anyway decide to take actions and manipulate its Rates, this will probably have am immediate impact on the Yen, and traders should be ready for such turn of events.

Oil - Has the Crude Oil Reached Its Peak?

Ever since reaching $73 a barrel, crude oil fell for a second day as it seems that the dollar bearish trend has limited its impact over crude oil. In addition, recent surveys in the U.S teach that unlike previous predictions and forecasts, the demand for gasoline in the U.S won't increase this summer. This only adds to the fact that leaving aside the weak dollar, there was no fundamental basis for the inflating oil prices.

Currently, speculations are made whether OPEC will decide to increase oil production in their next meeting. However with recent data showing that demand for oil is less than expected, it seems unlikely that OPEC will make such a decision.

As for the week ahead, traders are advised to follow the dollar's movements, as it was proven that crude oil prices are largely affected by USD fluctuations. In addition, traders should pay attention to the U.S Crude Oil Inventories report scheduled for Wednesday, as it tends to have a large impact on Crude Oil's prices, especially for the short-term.

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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!