USD - Dollar Goes Volatile on Optimistic Homes Sales Data
The U.S. Dollar experienced an extremely volatile trading day on Monday, as the New Home Sales data was released from the U.S. economy. The result was a better-than-forecast 384,000 homes versus the previous release of 346,000 homes. This is a whopping 11% increase, the biggest monthly increase since December 2000. This led to many analysts stating that this is the end of the U.S. housing slump. The result led to volatile USD trading. Moreover, the Dollar closed lower against some of its main currency pairs, due to optimistic data from regions such as the Euro-Zone.
At one point in trading the USD actually reached a 7-week low vs. the EUR at 1.4299. This was following the extremely optimistic German consumer confidence figures. However, the pair finally closed 33 pips higher at the 1.4246 level. The USD recorded its second daily loss in a row of 30 pips against the British Pound, as the GBP/USD finished trading at the 1.6484 level. This comes about as optimistic data from Britain continues to drive up the British currency. The USD/JPY pair finished higher, to close at the 95.17 rate. This comes about as the Yen falls from higher risk appetite.
Looking ahead to today, forex traders can expect plenty of news coming out of the U.S. The most important of this being the CB Consumer Confidence figures at 14:00 GMT, the speech by Federal Reserve Chairman Ben Bernanke at 22:00 GMT, and the speech by Treasury Secretary Timothy Geithner from 23:00 GMT. These 3 events are set to determine the level of the Dollar as Tuesday's trading takes off. The big 3 pairs to watch today are the EUR/USD, GBP/USD, and USD/JPY, as traders anticipate a weaker U.S. currency as the U.S. economy continues to recover.
EUR - EUR Boosted by German Consumer Confidence Figures
The EUR hit a 7-week high versus the USD in Monday's trading, following the Gfk German Consumer Climate figures. The result showed a 14 month high 3.5, significantly higher than the forecasted 2.9. This helped the EUR strengthen throughout Monday's trading. The reason why this data is so significant is due to Germany being the largest economy in the Euro-Zone. The EUR also was helped as U.S. New Home Sales jumped 11%. The EUR is likely to continue benefiting from the optimistic economic news.
The EUR/USD cross hit 1.4299, before closing 33 pips higher at the 1.4246 level. However, the European currency fell by 15 pips vs. the British Pound to 0.8635. This may be due to investors buying-up Pounds as risk appetite increases with more and more signs of global economic recovery. The EUR/JPY pair climbed by over 35 pips to the 1.3532 level, as traders continued to ditch the JPY due to preferring riskier assets, such as the EUR and GBP. Therefore, overall, the EUR did make some reasonable gains in Monday's trading.
Today, we won't be expecting much economic news coming out of the Euro-Zone. However, Britain and Switzerland are likely to be the key drivers of the European currencies later today. Britain is set to release the CBI Realized Sales figures at 10:00 GMT. Switzerland is scheduled to publish the UBS Consumption Indicator at 06:00 GMT. The results of both of these are set to drive both the GBP and CHF in today's trading. Additionally, the EUR will go volatile on both of these publications, and on key data coming out of the U.S. throughout today's trading.
JPY - Yen Falls to 3-Week Low vs. Dollar
The Yen fell to a 3-week low against the Dollar yesterday, in response to the rise in new U.S. home sales. The Yen also weakened on speculation that declines in currency volatility will spur carry trades. In carry trades, investors borrow at a low rate in one country and invest in another country with higher returns. This behavior is likely to continue as the main economies improve, and traders sell-off the safe-haven JPY. Thus the Japanese currency fell over 30 pips against the USD, EUR and GBP.
It is likely that the Yen will continue to decline today, as forex traders continue to take into account the optimistic economic data that was published from the U.S. and the Euro-Zone. The JPY will go very volatile in late trading, as Japanese Retail Sales are published at 23:50 GMT. It would be a wise choice for forex traders to open their JPY positions now in order to have the opportunity to profit from volatile market behavior as Tuesday's trading commences.
Crude Oil - Crude Oil Hits 3-Week High
Crude Oil hit a 3-week high of $68.94 a barrel on Monday, as the USD declined in response to positive housing data from the U.S. However, weaker earnings figures in some instances pushed Oil down from its peak, as the commodity finished trading at about $68.06 a barrel. Crude was also helped by a weaker Dollar in earlier trading due to positive economic news from Germany. However, it seems that in this instance, risk appetite wasn't strong enough to hold-up the value of Crude Oil on Monday.
As for today, Crude prices may rise if the USD weakens considerably, and there is increasingly optimistic economic news led by the U.S. Additionally, traders need to feel that there is enough demand to support Crude Oil at its current price level. In order to take advantage of the current trends, it is advisable for forex traders to begin opening their positions in Crude Oil and other commodities prior to volatile market conditions.
Article Source - The Currency Market Keeps on Eye on U.S.-China Dialogue
Key Overnight Developments
• Australian Leading Index Fell for First in Four Months, Says Conference Board
• National Australia Bank Says Business Confidence Rose to 15-Month High in Q2
• Australian Dollar Surges as RBA’s Stevens Talks Up Economy, Hints at Rate Hikes
The Euro advanced in overnight trading, testing 1.4270 ahead of the opening bell in Europe. The British Pound followed suit, adding 0.2% against the greenback.
Asia Session Highlights
New Zealand’s Trade Balance sank into deficit in June, revealing a monthly shortfall of –NZ$417 million. In annual terms, the deficit widened to –NZ$3.2 billion. The discouraging result came as exports fell 11% from a year before, the largest annualized decline since July 2007. We had forecast the outcome in our New Zealand Dollar Weekly Outlook, noting that outbound shipments were likely to take a beating after the local currency gained nearly 1% in June after jumping 8% in the previous month, making New Zealand’s goods comparatively more expensive for overseas buyers while boosting domestic purchasing power of foreign products. The release may weigh on the currency in the days ahead as it reminds the markets of New Zealand’s credit outlook downgrade by Fitch, which cited the “persistently large current account deficit” as a reason for concern about the country’s medium-term growth outlook.
In Australia, Conference Board’s Leading Index fell for the first in four months in May, dropping -0.1%. April’s reading was also revised downward to 0.3% from the originally reported 0.7% result. The metric tracks a number of leading indicators including rural goods exports, building approvals and stock prices to gauge the short- to medium-term trajectory of the overall economy. Perhaps the most important takeaway from the report is that the sales-to-inventory ratio, the largest component of the index, fell for the sixth consecutive month to reveal companies continue to suffer from lackluster demand. This underscores an increasing disparity between market sentiment and the underlying fundamentals of the economy. Buoyant stock markets and money supply growth had catalyzed the most recent run-up in the index, a dynamic that may be repeated in the forthcoming release considering Australia’s S&P/ASX 200 benchmark equity index added 3.6% in June. However, the equity rally seems hardly sustainable if sales growth remains lifeless, robbing firms of the kind of earnings that will not disappear once cost-cutting invariably reaches its natural limits.
Separately, National Australia Bank’s measure of Business Confidence printed at -4 in the second quarter, the highest reading since the three months ending March 2008. The forward-looking component of the report points to continued improvement in overall business conditions in the third quarter, albeit at a much slower pace than this time around. Employment and orders are both expected to improve, though firms’ profitability is forecast to decline.
Reserve Bank of Australia Governor Glenn Stevens struck a decidedly hawkish tone at a speech in Sydney, driving home the point that going forward the central bank is now actively trying to time a return to higher interest rates. Stevens said Australia is faring better through the global downturn than other developed economies, noting that “confidence has recovered ground” and boasting that “unemployment is rising slower than expected”. He went on to stress that central banks should not relax their commitment to keep inflation anchored through the recession, a clear hint that global tightening of monetary policy should now be on the table. That said, Stevens conceded that some stimulus needs to remain in place for now and conceded that the timing of unwinding expansionary policy presents a challenge. The market greeted the RBA chief’s comments, with the Australian Dollar surging 50 pips in a mere 30 minutes.
Euro Session: What to Expect
The UK CBI Distributive Trades report will offer insight on short-term trends in the retail and distribution sector. Retail Sales surged in June but the metric have exhibited extraordinary volatility since the beginning of this year so traders will be eager to look for any signs that a discernable trajectory is being established. On balance, cues from the labor market seem to point to subdued retail activity for the time being, with the jobless rate to approach 9% by the end of next year for the first time since 1994, trimming disposable incomes and weighing on spending.
In Switzerland, the UBS Consumption Indicator that aims to forecast the trend in private spending in the coming 3-4 months is likely to fall to a fresh 5-year low in June as the pace of unemployment continues to push higher, ticking up to a seasonally-adjusted rate of 3.8% in the same period for the first time since September 2005.
Written by Ilya Spivak, Currency Analyst
Article Source - Australian Dollar Surges as RBA Chief Talks Up Economy, Hints at Rate Hikes (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!