USD - Dollar Extends Profits against the Majors
The Dollar continues to strengthen against all the major currencies. During yesterday's session the greenback was traded near a two-week high versus the EUR. The Dollar also marked a significant uptrend against the Pound and Yen.
It seems that the main reason for the USD's appreciation yesterday came as a result of the positive Core Durable Goods Orders monthly report, as well as a statement by China that it will maintain a more loose monetary policy. Whilst the Durable Goods figures reported a drop of 2.5% in June, mainly as a result of the weak demand for new civilian aircraft and defense equipment, it seems that investors were more impressed by the 1.1% rise in the Core Orders during June.
The difference between the two reports is that the Core report measures the change in the total value of new purchases orders placed with manufacturers for durable goods, excluding transportation items. Orders for aircraft are known to be very volatile, and thus have the potential to distort the underlying trend. This is why investors tend to attribute more importance to the Core report. The positive figure marked the third consecutive month in which this report delivered signs of positive growth, driving investors to believe that the global recession is reaching its end.
As for today, the main publication from the U.S economy looks to be the weekly Unemployment Claims report at 12:30 GMT. Currently, while all the major indicators of the U.S economy are showing signs of improvement, it is only the job sector which continues to deliver negative figures. Analysts forecast that 578K individuals have filed for unemployment insurance for the first time during the past week. If the actual result will be similar, this could be the harshest unemployment figures in the last month. Such a result may help drive the demand for the safety of the USD and drive its recent bullishness even higher.
EUR - German CPI Marks First Annual Decline in 22 Years
The EUR dropped yesterday against most of the major currencies. The EUR is currently traded near a two weeks low against the Dollar, as the pair fell to the 1.40 level. The EUR also saw a sharp drop against the Pound during yesterday's session.
The EUR's slide came as a result of the unexpected negative German Preliminary Consumer Price Index (CPI) report. This indicator measures the change in the price of goods and services purchased by consumers in Germany. Considering the fact the Germany currently holds the strongest and relatively healthiest economy in the Euro-Zone, the inflation indicators from this nation have a large impact on the EUR. The indicator showed a drop of 0.1% in July.
More severely, this report has marked the first annual decline in consumer prices in Germany in more than 22 years! It appears to be the drop in energy and food costs, which took place as a result of the global recession, which created the poor annual decline in German CPI. It now seems quite certain that for any negative indicators from the German economy such as this one have the potential to weaken the EUR in the near future.
Looking ahead to today, another significant report is scheduled from the German economy. The German Unemployment Change, which measures the change in the number of unemployed people during the previous month, is expected at 07:55 GMT. Analysts have forecasted that unemployment in Germany increased by 44K in June. If the results are indeed close to this figure, the EUR might continue to depreciate against the major currencies.
JPY - Yen Slides on Poor Retail Sales Release
The Yen underwent a bearish session against most of the major currencies yesterday. The JPY dropped over 100 pips versus the Dollar, and over 200 pips against the Pound.
The Yen dropped yesterday on poor Retails Sales data. The report showed that the total value of sales at the retail level dropped by 3.0% in June, failing to reach expectations for a 2.5% drop. Furthermore, Japan's retails sales fell for a 10th month in June, making the longest losing streak since 2003. It seems that even though the Japanese economy is showing signs of recovering, mainly due to the positive export figures, the Japanese citizens are reluctant to resume last year's consumption levels, an indication that optimism may be lacking in Japan.
As for today, a batch of data is expected from the Japanese economy. Traders are advised to follow the Tokyo Core Consumer Price Index report. This report is a leading inflationary indicator for Japan, and thus tends to have a large impact on the JPY's value. If current expectations for a 1.7% drop will be similar to the real result, the Yen might continue to weaken against the major currencies in late-trading today.
Crude Oil - Will Crude Oil Drop Below $60 a Barrel?
Crude Oil prices continued to slide yesterday. Yesterday morning, a barrel of oil was valued near $66, but the current price is trading for less than $63. The main reason for the sharp cut in crude oil prices yesterday was the Crude Oil Inventories report. The report shows an unexpected surge in U.S. energy stockpiles. While analysts expected a drop of 1.1M barrels, the actual result showed that stockpiles surged by 5.1M barrels!
Most analysts had anticipated a pull-back in prices since Oil was seemingly over-bought technically and fundamentally, but the high inventories report simply put added weight to this expected downward pressure. In addition, the USD continued to strengthen yesterday. Crude Oil is valued in Dollars, and as such, tends to fall under the weight of a strong Dollar.
Looking ahead to today, traders are advised to follow the Natural Gas Storage report, scheduled at 14:30 GMT. This is more energy data that has the potential to influence oil prices by showing a continued trend of high stockpiles, indicating low demand. Traders should also consider the Dollar's movements in today's trading, as it has a large effect on commodity values.
Article Source - Crude Oil Price Crashes after Unusually High Inventory Data
Key Overnight Developments
• Japan’s Industrial Production Grows Most Since 1953 in Q3
• Euro, British Pound Flat Ahead of the Opening Bell in Europe
The Euro is effectively unchanged going into the European trading session having oscillated in a narrow 0.4% range around 1.4050 in overnight trading. Likewise, the British Pound fluctuated in a 0.4% band around 1.6380, yielding a flat result ahead of the opening bell in London.
Asia Session Highlights
Japanese Industrial Production grew at the weakest pace in three months in June, adding 2.4% from the previous month. In annual terms, the pace of decline moderated to -23.4%, the slowest rate of contraction since December of last year. On a quarterly basis, output gained 8.3% in the three months through June, the most since 1953. Much of the resurgence can be chalked up to companies replenishing inventories having sharply cut back on orders and production as the global economic crisis reached a boiling point in 2008. More of the same is likely in the coming months as restocking continues. In fact, minutes from the last meeting of the Bank of Japan revealed policymakers expect manufacturing and exports will continue to recover “mainly due to progress in adjustments in [inventories]”. That said, any sustainable rebound will have to come with growth in underlying demand, which is arguably destined to remain sluggish for some time. Indeed, the International Monetary Fund (IMF) said its latest world economic outlook that global trade volumes are likely to rebound just 1% having shed a whopping -12.2% in 2009.
Euro Session: What to Expect
Germany’s Unemployment Rate is set to rise to 8.4% in July, the highest since November 2007, as the Euro Zone’s largest economy sheds 43,000 jobs. Mounting layoffs will hinder Germany’s ability to mount a robust recovery from the current downturn, weighing on disposable incomes and discouraging consumption, the largest component of overall economic growth. Indeed, the IMF recently forecast that Germany as well as the Euro area as a whole will stand apart from other industrialized economies in seeing GDP continue to shrink in 2010. Further, the ailing labor market is likely to become a more visible drag on risk appetite as the government’s fiscal package is used up and firms run out of room to cut capacity and produce upside earnings surprises, yielding to sluggish revenue growth and driving stock valuations lower. This bodes ill for the Euro, particularly against the US Dollar, with interest rates likely to remain low and risky assets on the defensive.
Separately, Euro Zone Economic Confidence is expected to rise to 75.0 in July, marking the fourth consecutive month of improvement since the metric hit a record low in March. The reading is a composite of five sub-sector sentiment reports: Industrial Confidence (40%), Service Confidence (30%), Consumer Confidence (20%), Construction Confidence (5%), and the Retail Trade Confidence Indicator (5%). The metric may continue to gain for a bit longer as the combined impact of fiscal stimulus measures across the region and higher stock prices boost confidence, but seems likely to reverse course in the medium term as lackluster domestic and overseas demand creep back into the forefront.
Written by Ilya Spivak, Currency Analyst
Article Source - Euro May Extend Losses as German Jobless Rate Hits Highest in Nearly 2 Years (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!