7.13.2009

High Volatility might Continue this Week

The dollar was slightly more volatile over the past week than usual, and the explanations for this have been getting trickier by the day. As for this week, forex traders are advised to take positions on trades, as a string of data releases coming out of Unites States, Europe and Japan are likely to affect the greenback's main currency crosses.



USD - The Greenback Waives Up Its Friday's Gains

The U.S dollar had risen on Friday, against most major currencies amid fears of weak U.S. corporate profits and fading hopes for a global recovery. The USD regained the upper hand as concerns about the global economic outlook curbed investor appetite for riskier assets. Versus the Japanese yen however, the dollar bought 92.37 yen, slipping from 92.99 yen Thursday. The dollar tumbled to 91.81 yen Wednesday, its lowest level versus a broadly higher Japanese currency in more than 4 months.

A report showing U.S. consumer sentiment soured in early July also boosted the currency on Friday. The Dollar can rise if investors sell risky assets such as stocks and commodities and buy back the low-yielding dollars used to finance those purchases, analysts have said.

However, in early Monday trading the USD dipped against the EUR, with the single European currency rising 0.2% to $1.3971, regaining some of the ground it lost against the Dollar on Friday. According to analysts prognosis the U.S dollar may decline to $1.45 per EUR in 3 months, before rebounding to $1.37.

EUR - The British Pound Declines on U.K. Recession Fears

The EUR rose versus the greenback Monday on prospects European Central Bank (ECB) President Jean-Claude Trichet will today signal policy makers will refrain from cutting Interest Rates. The European currency also edged up 0.3% against the Japanese yen to 129.51 yen, having pulled up from last week's low of 127.00 yen, which was the lowest in almost 2 months.

Meanwhile, the British pound fell against the Dollar for a 2nd week as U.K. stocks fell to their lowest in more than 2 months on indications Europe's second-largest economy remains mired in a recession. The British currency also recorded its biggest weekly loss against the Yen in more than 5 months, as it tumbled 4.6% this week to 149.62 yen. After climbing almost 13% against the U.S dollar in the first half of the year, the Pound is sliding as investors pare back expectations for a revival in the U.K. economy. The Organization for Economic Cooperation and Development said on June 24 that U.K. Gross Domestic Product will likely shrink 4.3% this year, thus adding to the GBP negative picture.

Yen - Yen Losses on Speculation Goldman Sachs Profit Will Surge

The Japanese currency weakened on speculation Goldman Sachs Group Inc. will report the largest profit since it set earnings records in 2007, reviving demand for higher-yielding assets. The Yen also fell against all 16 major currencies after the opposition Democratic Party of Japan won Tokyo elections yesterday, spurring concern that political uncertainty in the world's second-largest economy will worsen.

The Yen surged last week as equities and oil prices fell as optimism about a speedy recovery in the global economy faded, with investors fretting that a rally in risk assets since March may have been overdone.

Oil - Crude Falls below $60, Heading For Further Loss

Crude Oil prices fell below $60 a barrel Friday, marking their biggest weekly loss in 6 months as an International Energy Agency (IEA) report reaffirmed concerns about weak demand. Also weighing on Oil prices Friday, data showed U.S. consumer sentiment fell sharply in early July, adding to the recession worries that also dragged U.S. stocks lower.

Oil has tumbled 10.3% this week, its biggest weekly loss. This sharp decline came after the Commodities Futures Trading Commission, the U.S. futures market regulator, said earlier this week that it was considering applying limits on speculation in energy futures.

The market has been too optimistic about a global economic recovery later this year, but that now looks unlikely to happen, so Crude Oil prices are declining. According to analysts Crude prices could see more corrections in the short term as external factors which have helped oil's recent rally, including a weak U.S. dollar and rising equities, are set to reverse course.

Article Source - High Volatility might Continue this Week
High Volatility might Continue this WeekSocialTwist Tell-a-Friend

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!