USD - USD Bullish on Goldman Sachs Earnings; Mixed from Retail Sales
The US Dollar completed yesterday's trading session with mixed results versus the major currencies as U.S. data on retail sales and producer prices beat expectations, boosting hopes that the economy is on a slow path to recovery. By yesterday's close, the USD had fallen against the GBP, pushing the oft-traded currency pair to 163.25. The greenback did see some bullishness as well as it gained 50 pips against the JPY and closed at 93.56.
Investment bank Goldman Sachs reported strong profits yesterday, but economic signals from the United States and Europe dimmed optimism that a global recovery may be on the horizon. In addition, U.S. retailers beat expectations with a 0.6% sales rise in June, boosted by a big jump in auto sales. But excluding both autos and gasoline, sales were down 0.2 % in a fourth consecutive monthly decline. The slight rise in risk appetite also boosted higher-yielding currencies at the expense of both the Yen and USD, which tend to see their biggest gains when investors grow anxious and buy them as safe havens.
USD trading will be interesting today as important economic data is expected to be released. From 12:30 GMT a series of economic indicators will begin to be released, starting with Core CPI figures, the Empire State Manufacturing Index, Industrial Production and Crude Oil Inventories. Surprisingly, almost all of these releases are expected to be higher than their previous figures, meaning the USD could show bullishness today. Traders are also advised to follow FOMC Meeting Minutes at 18:00 GMT. This meeting is very important as it is very likely to impact the Dollar's volatility. Traders are advised to watch closely, as this is likely to set the pace of the Dollar going into the rest of this week's trading.
EUR - EUR Pressured by German Economic Sentiment Figures
The EUR finished yesterday's trading session with mixed results versus the major currencies. The 16-nation currency extended gains versus the Japanese yen on Tuesday, to trade above $130.75 amid a broad sell-off in the yen. The EUR experienced similar behavior against the CHF as the pair rose from 151.40 to 152.10 by days end. The EUR did see bearishness as well as it lost around 60 pips against the GPB and closed at 0.8560.
Data showed German investors have turned more pessimistic than expected in July for the first time in nine months, a signal analysts say means the nation's economy will not start growing until next year at least. Euro-Zone industrial production data also disappointed, growing only slightly in May after a bad release in April and remaining 17% lower than it was a year earlier.
Optimism about the German economy has grown in recent weeks, with data pointing to stabilization in the manufacturing sector and government officials saying gross domestic product (GDP) could be flat or slightly higher in the April-June period, breaking a string of four straight quarters of contraction. But the Mannheim-based ZEW economic think tank's monthly index of economic sentiment fell yesterday to 39.5 from 44.8 in June, the first drop since October 2008, signifying that expectations for a speedy recovery have begun to fall.
JPY - Yen Losing Ground on All Fronts
The JPY saw a bearish trading session yesterday, losing ground against most of its currency crosses. The JPY fell sharply against the Sterling Pound, pushing the oft-traded currency pair to 152.50. The Japanese yen experience similar behavior against the EUR and closed at 130.55.
The Japanese market should have a heavy effect on the JPY versus its major currency counterparts, as the Overnight Call Rate will be announced today. The rate is expected to remain unchanged, but traders should pay close attention to the BoJ Press Conference that will follow to look for expectations of Japan's economic future. A bullish statement from the BoJ could lead some traders to believe that it is forecasting a rosier financial climate in Japan.
Crude Oil - Crude Oil Inventories to be Released Today
Crude Oil prices rose slightly yesterday in seesaw trading as concerns about consumer demand tempered an earlier rally on optimism reflected in a global equities rally. Oil prices have fallen by about $14 a barrel, or 19%, since June 30th after poor employment data from the U.S. and Europe raised doubts that the global economy was poised for a strong recovery this year.
Today, the release of crude oil inventory data is likely to help determine the market's next direction for the black gold. Moreover, a release of a string of positive economic figures from the U.S could help its bullishness. Therefore, traders are advised now to make some profits as the price of Crude Oil is set to remain volatile in the short-medium term.
Article Source - European Economic Sentiment Plunges, EUR Flattens
Key Overnight Developments
• Australia’s Leading Economic Index Falls For the First Time Since February
• Bank of Japan Keeps Rates at 0.10% But Cuts GDP Growth Forecast, Extends QE
• Euro, British Pound Rise Against US Dollar on Overnight Stock Gains
The Euro traded higher in the overnight session, adding 0.2% against the US Dollar. The British Pound followed suit, testing as high as high as 1.6337. The greenback lost ground as stocks followed Wall St higher across Asian exchanges, trimming demand for the safety-linked currency.
Asia Session Highlights
Australia’s Westpac Leading Index shrank for the first in three months in May, slipping -0.2%. The metric is designed to predict The annual rate of decline slowed to -3.9%, the lowest in at least 6 months. Westpac chief economist Bill Evans struck a cautiously optimistic tone following the release, saying “This reading supports the reasonable expectation that we have passed the worst, although the index is still contracting on a six-month annualized basis.” Evans has previously revealed that Westpac expects the economy will shrink 0.6% in the second quarter and contract at an annualized rate of -1.5% through the second half of this year.
Australia has shown tentative signs of stabilization as the government distributed over A$12 billion in cash handouts and committed to A$22 billion for infrastructure projects. The big question going forward is if current momentum can be maintained as the flow of stimulus cash dries up. On balance, the outlook seems far from rosy: the labor market continues to suffer, erecting barriers to a meaningful rebound in domestic demand, while the latest trade data reveals lackluster overseas demand for coal and iron ore, Australia’s top export commodities. Although the Reserve Bank of Australia kept interest rates unchanged at 3% earlier this month, Governor Glenn Stevens noted that there is still “scope for further easing of monetary policy”, identifying credit conditions and the effects of economic weakness on asset quality as “a challenge”.
The Bank of Japan kept interest rates unchanged at 0.10%, as economists expected. Policymakers said that “economic conditions have stopped worsening” and restated expectations that the economy will begin to recover by the second half of the 2009 fiscal year (the six months starting in October). Maasaki Shirakawa and company did qualify their optimism however, saying “uncertainty over the economic outlook is high” and revising their growth projections downward to reflect a -3.4% GDP contraction (versus the previously reported -3.1%) in the 12 months to April 2010. The BOJ also extended standing credit easing measures, saying they will keep current loan collateral practices in place through March of next year versus December and pay interest on bank’s reserves through January 2010 (as opposed to October 2009 as originally planned).
Euro Session: What to Expect
UK Jobless Claims are expected to rise by 41,200 in June, pushing the Claimant Count (a measure of the unemployment rate) to 5.0%, the highest since September 1997. Continued weakness in the labor market suggests that, improving leading indicators notwithstanding, a robust recovery in Europe’s third-largest economy will have a hard time gaining traction as job losses weigh on consumption, the largest contributing factor to GDP growth. The current state of affairs was nicely summarized by London-based think tank NIESR, which recently said “the U.K. economy is now stagnating rather than continuing to contract at a sharp pace”. NIESR expects the economy to shed -0.4% in the second quarter, a dubious improvement after GDP lost -4.9% through the first three months of the year, the most at least since 1956. A survey of economists conducted by Bloomberg expects the jobless rate to average 8.4% through the end of next year.
Turning to the continent, the Euro Zone Consumer Price Index report is set to confirm preliminary estimates and show that inflation fell at an annual pace -0.1% in June, the first negative reading on record since the creation of the single currency in 1991. Entrenching expectations of lower prices threatens to commit the currency bloc to a long-term period of stagnation as consumers and businesses are encouraged to wait for the best possible bargain and perpetually delay spending and investment. The market is pricing in virtually no chance that the European Central Bank will cut benchmark rates at least this year while the International Monetary Fund forecasts that the Euro Zone will stand apart from other industrialized economies in seeing GDP shrink in 2010, making the deflationary threat all the more credible. Although Trichet and company have offered an unprecedented 442 billion euro in 12-month bank loans as a means of de-facto monetary easing and will also move forward with a 60 billion bond-buying scheme, these measures may prove inadequate as there is no guarantee that banks will lend out the funds raised from action. Indeed, banks may chose to hang on to the cash as a buffer against $1.1 trillion in as yet unrealized losses linked to the subprime mess, per the IMF, as well as the fallout from looming defaults and/or devaluations among the EU’s recently-minted central European members.
Written by Ilya Spivak, Currency Analyst
Article Source - Euro and British Pound Vulnerable on Weak UK Jobs, Euro Zone Inflation Data (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!