USD - Dollar Optimism High Following Fed Statements
The USD has begun a rather strong rally during yesterday's early morning trading hours after the Federal Open Market Committee (FOMC) stated that it may not buy-up further Treasury securities. After climbing to as high as 1.4139 against the EUR the pair now sits near the 1.3950 price level, and seems to have leveled-off. Against the British Pound traders witnessed similar behavior to that of the EUR/USD with a steady climb towards 1.6600 followed by a steady decline back towards 1.6400.
This behavior was likely brought on by a low level of confidence going into the FOMC meeting yesterday which caused a sell-off for the USD. However, with an unexpected show of confidence in the future recovery of the US economy, and statements describing a slowing of the economic contraction, traders viewed the greenback as a solid investment for this turbulent period. As such, the value of the Dollar has been on the rise against almost all the major currencies.
On the other hand, today's economic calendar is filled with events capable of shifting the momentum into the opposite direction. If the unemployment claims report shows that jobs are still being lost in substantial numbers, and if the Final GDP figures come out worse than expected, this market optimism could suffer a devastating setback. Federal Reserve Board Chairman Ben Bernanke is also due to testify on the acquisition of Merrill Lynch by Bank of America to Congress at 14:00 GMT which will no doubt cause a stir in the forex market directly after his opening statements.
EUR - Euro-Zone Weakens on Poor Data, EUR sees Mixed Results
The EUR began today's trading session with mixed results against its major currency rivals. Losing ground to the greenback as the US Federal Open Market Committee (FOMC) announced it would not purchase additional Treasury securities, which aroused a surge in the value of the Dollar, the EUR/USD fell this morning towards 1.3950. Contrary to this, however, the EUR witnessed a sharp spike against the Swiss Franc as the Swiss National Bank (SNB) decided to de-value the CHF out of fear of deflation. The pair now trades above 1.5300, up from 1.5000 yesterday.
This week has proven to be a painful trading week for the European currencies as financial data has shown a deepening contraction of the economies in the region. European Central Bank (ECB) President Jean-Claude Trichet warned about budget deficits on Monday while the World Bank declared that the global economic contraction may be worse than conventional forecasts. Tuesday was fraught with a series of poor manufacturing and production reports from Germany and France, and yesterday's Current Account report only validated Trichet's earlier estimation that budget deficits were becoming a more looming problem.
From the above information comes a panel of valuations for the EUR which may appear confusing. Against other European currencies, the EUR was largely flat, except for the CHF which was intentionally de-valued. And against the JPY, the EUR has climbed, as the island currency loses strength across the board. Today's trading will no doubt be dominated by the US Dollar considering its recent surge may come to an end if today's data proves disappointing. If this is indeed the case, the EUR may find itself on the rebound. Whatever the outcome, today will be a great day for short-term traders as the volatility is certain to be intense.
JPY - Yen Pares Gains as Traders Turn Westward from Europe
After climbing towards important psychological barriers against a number of currencies, the JPY apparently failed to breach on all fronts and is now positioned to lose strength against all of its currency counterparts. Hitting the 95.00 price level against the USD, the pair has now entered an uptrend as the Yen loses out to the Dollar's recent surge. Against the EUR and GBP traders can see very similar behavior to that of the USD/JPY with a strong uptrend for the JPY followed now by a small, corrective down-tick.
With little news affecting the island currency today, there is a chance that this turn of events was brought on by the relative safety of other assets. With confidence declining across Europe, but gaining strength in the US, measurements of risk aversion and risk appetite appear muted and confused. The aversion to risk throughout the Euro-Zone may have pushed investors into safe-havens, but the strength of the greenback pulled most investors westward to the States instead of Japan. With a number of important manufacturing and inflationary figures being released at the end of Thursday's session, we may yet see a growth in volatility for the JPY.
Crude Oil - USD's Surge puts Rising Price of Oil on Hold
The price of Crude Oil was expecting further support yesterday as the USD was being sold off by most investors. The build-up towards the FOMC statement yesterday had many investors anticipating an increase to the purchase of US Treasury securities. When this was not forthcoming, a surge in confidence for the Dollar put Crude Oil's rebound on hold. The price leveled off around $68.50 a barrel and appears to be standing firm.
The Organization of Petroleum Exporting Countries (OPEC) and the European Union (EU) have recently called for further regulation of the energy market to prevent another bubble from forming in the price of Crude Oil. While stating that recent oil prices are not yet a threat to global economic recovery, the fear of a speculation bubble still looms large in the minds of producers and consumers alike.
With crude inventories in the US shrinking more than anticipated, there is a chance that prices will continue to rise as demand climbs from market optimism and economic growth, and OPEC has even declared that a price range near $80 a barrel is preferable. These factors point to the notion that Crude Oil's price may stumble across more support in the near future and continue to rise.
Article Source - U.S. Unemployment Claims on Tap
Key Overnight Developments
• NZ Current Account Deficit Shrinks as Imports Tumble 21.9%
• US Dollar Trades Lower as Stocks Rise on US Durable Goods Data
The Euro crept higher in the overnight session, adding 0.4% against the US Dollar. The British Pound followed suit, testing as high as 1.6468 against the greenback. The Dollar backed off after gaining substantially in US hours as stocks surged in Asian trading, boosted by an unexpected improvement in US Durable Orders that weighed on demand for safe-haven assets.
Asia Session Highlights
New Zealand’s Current Account deficit shrank in the first quarter, revealing a shortfall of –NZ$1.25 billion versus –NZ$4.06 recorded in the three months to December 2008. However, the improvement in the headline figure is hardly encouraging, owing to a -21.9% decline in imports rather than any rebound in foreign demand. The metric paints a picture of weak domestic demand and seems all the more ominous in the context of a 1.1% currency appreciation during the reporting period which would reasonably be expected to boost New Zealanders’ purchasing power of foreign goods. Private consumption accounts for 62.3% of overall economic growth and continued weakness in domestic spending makes it unlikely that the smaller antipodean nation can mount a meaningful recovery from the current downturn in the near term. Indeed, tomorrow’s GDP report is expected to show that the economy contracted for the fifth consecutive quarter, shrinking -0.7% in the three months to March.
Euro Session: What to Expect
An uneventful economic calendar is likely to yield to risk trends as the primary driver of forex price action in European trading hours. Where these trends will lead the major currencies in the very near term looks uncertain, however, as traders resolve the balance between the impact of an unexpected improvement in US Durable Orders and the dovish FOMC policy announcement. The Asian session seemed to favor the former catalyst, pushing stock prices higher and modestly weighing on the US Dollar. The same looks likely going forward with US equity index futures implying the Dow Jones and S&P 500 will open over 1% higher on Thursday, hinting at a healthy appetite for risk-taking across financial markets. That said, a downward revision in tomorrow’s final update to US first-quarter GDP figures may amplify the Fed’s cautious tone, supporting demand for safe-haven assets and boosting the greenback.
Written by Ilya Spivak, Currency Analyst
Article Source - US Dollar Threatened as Asian Stocks, US Index Futures See Rising 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.
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!