USD - USD Trades Higher on Economic Outlook
The greenback gained Tuesday as a report on U.S. home prices showed that the pace of price declines may be slowing and manufacturing data from June came in slightly better than expected. The Dollar may extend its gains versus the EUR after a report showed an unexpected drop in U.S. consumer confidence for June, increasing demand for the safety of the world's main reserve currency.
The USD traded at 1.4035 versus the EUR, following a 0.4% gain yesterday. The dollar also fetched 96.35 yen following a 0.3% advance. Tuesday's data gave investors more reasons to buy the U.S Dollar. For months, improvements in the outlook for the economy, financial markets or other companies has led to stock gains and weighed on the USD, taken as a signal of reduced demand among investors to hold the safe-haven currency.
However, analysts have said that the Dollar may be near a turning point, after trading in a pattern closely correlated with equity moves. Investors have sold U.S. Dollars recently as stock markets and oil prices rose on an upbeat view for prospects of a global economic recovery, hurting demand for the greenback as a safe haven.
Investors now await the U.S. government's high-profile monthly employment report. The jobs data is due on Thursday as U.S. financial markets will be shut on Friday for Independence Day.
EUR - EUR Holds Steady vs. Greenback and Rallies against JPY
The EUR gained versus the U.S Dollar on speculation European Central Bank (ECB) policy-makers will today signal that the central bank will keep Interest Rates on hold into next year to aid an economic recovery. ECB member Axel Weber said last week that the central bank has used up its scope to cut Rates. Policy-makers will leave the benchmark rate unchanged at this week's meeting, according to analyst predictions.
There is also an improving sentiment in the Euro-Zone's economic conditions. European economic confidence rose more than economists forecast in June, the European Commission in Brussels reported yesterday, signaling the region's slump is abating. Analysts predict that the ECB will keep Rates at 1% for the foreseeable future. And that might turn the EUR further on the upside.
The European currency has advanced the most in 4 months against the Yen, last traded at 135.56 yen from 135.21 yesterday. When it reached 135.96 for a brief stint yesterday, this was the highest level reached since June 15. The EUR has risen 7.1% versus the Japanese yen this year and doesn't seem to be losing any momentum.
JPY - Yen Declines as Investors Dump Safety Demand
The Japanese Yen weakened against the EUR and the Dollar yesterday after a report showed China's manufacturing expanded for a 4th consecutive month, dampening demand for the relative safety of Japan's currency. The JPY fell to 135.80 per EUR and weakened to 96.95 per U.S. Dollar from 96.36. The Yen also fell against 15 of the 16 most-traded currencies after an Australian report showed retail sales climbed for a 3rd month, giving investors more confidence to purchase higher-yielding assets.
Although, the Bank of Japan's (BOJ) June Tankan corporate survey showed on Tuesday that big manufacturers' sentiment pulled back from a record low hit 3 months ago, the improvement was smaller than forecast. The Yen edged down against the Dollar after the news but the market's reaction was subdued overall as investors decided that it offered no surprise.
Analysts said that the market has considered all the positive factors that have come out and is starting to react more to negative factors. The market is lacking clear direction and is likely to stay in an adjustment period for now.
Crude Oil - Crude Oil Momentum to Rise Further
Crude Oil rose above $70 a barrel after an industry report showed the biggest decline in crude inventories since September in the U.S., the world's largest user of the fuel. Also today, the Energy Information Administration (EIA) report will probably give a better direction to the market.
A U.S. Energy Department report today will likely show Crude Oil stockpiles declined 2 million barrels, according to economists' estimations. A fall in crude inventories may cause the commodities market to move higher, and will reinforce Crude to stay at or go above current levels.
Oil prices yesterday spiked above $73 a barrel, which stood as the June high for more than 2 weeks, as the Dollar declined and escalating militant attacks in Nigeria raised concern that supplies may be disrupted. Crude Oil is set to extend gains amid this week's volatility and may reach the $76 a barrel level.
Article Source - ADP Employment Data to Drive the Majors Today
Key Overnight Developments
• Japan’s Tankan Survey Reveals Dour Outlook for Manufacturing
• Australian Retail Sales Top Expectations But Outlook Still Uncertain
The Euro is little-changed heading in the European market open after a choppy overnight trading session that saw the single currency test as low as 1.4002. The British Pound slipped a bit lower, paring initial losses that saw the sterling sink as low as 1.6415 to trade down -0.1% ahead of the opening bell in Europe.
Asia Session Highlights
Japan’s Tankan Large Manufacturers Index rose to -48 in the second quarter from a record low at -58 recorded in the three months to March. The forward-looking Outlook index that aims to predict the third-quarter outcome rose to -30, narrowly topping economists’ forecasts of a -34 result. Despite the improvement in the headline figure, details of the report were far from encouraging: large manufacturers’ sales are expected to fall -14% in 2009 fiscal year (12 months through March 2009), the most in five years, while profits are set to shrink -39.5%. Sub-indexes measuring employment conditions and production capacity are both forecast to decline by September while the difference of expected demand less supply is set to narrow in the same period. On balance, this bolsters the Bank of Japan’s latest assessment calling for output and exports to “level out” due to inventory adjustments, meaning firms are set to continue to operate at leaner levels as demand remains lackluster. This means employment and consumption are set to remain at the lower end of the spectrum for some time notwithstanding recent improvements in household spending driven by a temporary boost from the government’s record-setting $25 trillion yen stimulus package.
Australian Retail Sales grew more than economists expected in May, adding 1% after growing 0.3% in the previous month. Forecasts issued ahead of the release were calling for a 0.5% expansion. In annual terms however, receipts grew 6%, the smallest increase since February. Department stores and clothing retailers led the metric higher, adding 5.5% and 2.9%, respectively. Sales were likely driven by the government’s aggressive spending efforts considering the same period also saw rising unemployment as well as shrinking private-sector credit. The big question going forward remains whether the economic growth will retain current momentum after the flow of stimulus cash dries up, and the outlook seems decidedly dour. A survey of economists conducted by Bloomberg calls for the jobless rate to hit 6.5% by the end of 2009, amounting to substantial headwinds for incomes and consumption, while Westpac Banking Corp has said the economy will shrink at an annualized rate of -1.5% through the second half of this year.
Euro Session: What to Expect
German Retail Sales are expected to come to a standstill in May with annualized receipts falling for the fourth consecutive month, this time by -1.5%. Deepening turmoil in the labor market has weighed on disposable incomes, trimming spending and encouraging precautionary saving. Indeed, the unemployment rate rose to 8.3% in June, the highest in 16 months, and is expected to average around 10% through the end of 2010 according to the International Monetary Fund. Consumption is the largest contributor to overall economic growth, meaning the chance of a substantive recovery in GDP growth is unlikely in the months ahead, both for the Euro Zone’s largest economy and the currency bloc as a whole. The prospect of deepening recession and an increasingly credible deflationary threat have boosted expectations that the European Central Bank will cut interest rates later this week, with overnight index swaps suggesting the market now sees a 59.9% chance of a 25 basis point reduction.
Written by Ilya Spivak, Currency Analyst
Article Source - Euro Vulnerable as German Retail Sales Stall, Bolstering Case for ECB Rate Cut (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!