USD - USD Loses Momentum Ahead of G8 Meeting
The U.S Dollar dipped against the EUR on Friday, reversing some of its sharp gains the previous session following weak U.S. jobs data. On Thursday, data showed the U.S. economy lost a much greater than expected 467,000 jobs in June, pointing to a long, slow economic recovery and causing market sentiment to sour.
Gains in the greenback were also tempered after Russia and India said the global economy is too dependent on the U.S. currency and called for revisions in how $6.5 trillion in foreign-exchange reserves are managed. The impact has been mixed, but the market still appears dollar-positive.
Trading has been extremely thin, due to the U.S. Independence Day holiday, with most major currency pairs staying within very tight ranges. This week, investors will likely focus on the Group of Eight (G8) meeting on July 8-10 for any further debate on currency diversification plans. This may cause the U.S Dollar to come under further weakness this week.
EUR - EUR Recovers Modestly after Thursday's Sharp Fall
The EUR edged higher against the Dollar on Friday, correcting after sharp falls during the late hours of the previous session in the wake of bleak U.S. jobs numbers which dampened hopes for a global economic recovery. Trade was quiet, however, with U.S. markets closed for a public holiday.
The EUR reacted little to the weaker than forecasted Euro-Zone retail sales data and a slight upward revision to the purchasing managers' survey for services in the region. Despite the EUR recovery, the common currency stayed well below a 1-month high above $1.4200 hit earlier in the week, with some analysts saying any gains are likely to be limited due to concerns about the sustainability of any economic improvement.
The European currency has declined for a 3rd day versus the Yen, the longest stretch in 7 weeks. The EUR fell after Russian President Dmitry Medvedev said the world is too reliant on the Euro-Zone currency, damping the appeal of European assets. Also, Germany's IKB Deutsche Industriebank AG said it lost 580 million EUR ($810 million) in the fiscal year ending March 31st as the value of its investments fell. The news is a reminder there are still financial problems in Europe that imply the region may not be so safe, and that may be negative for the EUR, analysts have said.
JPY - Yen Strengthens vs. EUR, Most in 7 Weeks
The Japanese Yen strengthened against the EUR and the Dollar on concern credit market losses will keep increasing in Europe and the U.S., spurring demand for the relative safety of Japan's currency. The Yen strengthened to 133.46 EUR from 134.26 last week, after rising to 133.30, the highest level since June 25th. The currency also rose to 95.39 per Dollar from 96.04. The JPY gained versus all of the 16 most-active currencies as Asian stocks declined, prompting investors to cut holdings of higher-yielding assets.
However, the JPY's gains may be curbed after North Korea test fired its short-range missiles on July 4th, spurring condemnations from the U.S., South Korea and Japan. Analyst said that as long as North Korea is launching short-range missiles that can't reach the territory of Japan, this geopolitical news which often weighs on the Yen, will not affect the price action. Traders said that the key for the financial market is positioning ahead of the G8 summit. The U.S Dollar may come under further weakness this week, and this could support the Yen a little bit higher as well.
Crude Oil - Oil Falls on Firmer U.S Dollar
Crude Oil prices fell as the U.S Dollar climbed against the EUR, limiting investor appetite for assets to hedge against inflation. A rising Dollar usually reduces the attraction of raw materials such as oil. Crude Oil fell to the lowest in 5 weeks, to $64.93 a barrel on a stronger USD and speculation U.S. fuel inventories will increase as the recession curbs demand in the world's biggest energy-consuming country.
The Organization of the Petroleum Exporting Countries (OPEC) has said prices needed to be around $75 to spur investment and it has lowered its output targets by 4.2 million barrels per day since last September to try to support the market. The Oil minister of Kuwait, the 6th biggest producer of the OPEC producers, said yesterday that he wants to see oil prices stay above $60 a barrel and will watch the market closely before deciding on its output at OPEC's meeting in September.
Article Source - G8 Meeting to Spur Forex Market Volatility
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.
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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.
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Good luck to everyone!