8.26.2009

Crude Oil Plummets on Profit Taking

Later afternoon trading saw the price of Crude Oil take a nose dive as traders took profit. The price of Oil stalled at the $75 resistance level and fell significantly following the failed breach. Today traders will be tracking the release of the U.S. Crude Oil Inventories data along with the New Home Sales numbers for today's market direction.



USD - Dollar Sees Mixed Results against the Majors

Yesterday, the Dollar saw mixed results against its major currency rivals. Against the EUR, the Dollar began the trading session with sharp drops, yet it managed to fully recover later on. The Dollar saw mixed result against the Yen as well.

The Dollar's recovery came as a result of the better than expected Conference Board Consumer Confidence report. The report showed that the U.S. consumers' confidence has increased in August, largely due to the labor market recovery. The report rose to 54.1, making the first gain in three months, from 47.4 in July. The most significant outcome of this result is that it shows that consumers feel their financial outlook is secure and thus allow themselves to spend more. Eventually this has the potential to elevate the economy as analysts expect.

Looking ahead for today, a batch of data is expected from the U.S. economy. Two main publications are expected to create large volatility in the market - the Durable Goods Orders indices and the New Home Sales. The Durable Goods Orders indices are expected at 12:30 GMT. Investors hold great importance to their results as they are leading indicators of production, especially the core report. The New Home Sales is scheduled for 14:00 GMT. This is one of the highest indicators of the housing sector, and thus has an immense impact on the Dollar. Analysts forecast 393K new single-family homes were sold during July, and if the end result will be similar it has the potential to boost the Dollar's recovery.

EUR - German Business Climate on Tap

During yesterday's trading the EUR saw volatile activity against the major currencies. The Euro saw mixed results against the Dollar and the Yen, beginning the day with rising trends yet dropping later on. However against the Pound, the Euro continued the bullish trend from the last few days.

The EUR's rise in early trading came as a result of the positive data published from the Euro-Zone. The German Final Gross Domestic Product showed a 0.3% rise in the inflation-adjusted value of all goods and services purchased by the German economy, marking the first positive results in 5 months. This continued the recent positive figures from both Germany and France, the two largest economies in the Euro-Zone. Also yesterday, the Belgium Business Climate report delivered a better than expected figure after dropping 18.2 points, beating expectations for a 19.7 drop. This also supported the EUR during yesterday's trading.

As for today, two main publications are expected from the German economy, the German Import Prices and the German Business Climate. The German Business Climate, published by the Institute for Economic Research, is expected to create a large impact on the EUR. It is considered to be a leading indicator of economic health because business is known to react quickly to market conditions. A positive result is likely to increase hope for an early economic recover, which has the potential to strengthen the EUR.

JPY - Yen Recovers against the Major Currencies

The Yen saw a mixed trading day during yesterday's session. The Yen began with bearish trends against both the Dollar and the EUR. However, later on it managed to recover back to previous rates. Against the Pound, the JPY continued to strengthen and the GBP/JPY is currently traded around the 153.40 level.

The Yen recovered due to concerns that financial losses will delay a recovery in the global economy, increasing demand for the Yen as a refuge. Currently, many analysts claim that the outlook for economies around the world is still doubtful. This situation is known to create risk aversion, which leads to the purchase of the Yen.

During late trading, the Japanese Trade Balance report was released, delivering a poor result of 0.19T, lower than the 0.35T expected. The Japanese economy largely relies on its exporting, and thus this result has the potential to halt the Yen's recovery.

As for the day ahead, no imported data is expected from the Japanese economy. Traders are advised to follow the leading publications from the U.S and the Euro-Zone as they are likely to set the tone in today's trading.

Crude Oil - Crude Oil Drops to $71 a Barrel

Crude Oil fell close to $3 a barrel during yesterday's trading, to the lowest price in a week, seeing the first decline in six days.

Crude Oil dropped from $75 a barrel to $71.20 on signs that reduced lending in China deceased demand for the world's fastest-growing, energy-consuming county. Another reason for oil's weakness is the recovering Dollar. Because Oil is valued in Dollars, the fluctuations in the Dollar's value tend to affect oil as well. During yesterday's trading, a U.S. Consumer Confidence report was released, providing a better than expected figure, which promptly strengthen the Dollar. This eventually had an impact on Crude Oil's value, and led to the sharp drop.

As for today, the U.S. Crude Oil Inventories is scheduled at 14:30 GMT. This report measures the change in number of barrels of crude oil held in inventory by commercial firms during the past week. Its result tends to have an immense impact on oil's value, and traders are advised to follow this report with extra caution.

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Euro May Gain as German IFO Rises But Long-Term Outlook Favors Downside (Euro Open)

The Euro may see near-term gains in European hours as Germany’s IFO indicator of business confidence shows that companies’ 6-month economic outlook improved for the eighth consecutive month in August, but the likely path of interest rates favors the downside in the long-term outlook.

Key Overnight Developments

• Japan's Trade Surplus Shrinks in July, Further Losses Likely
• Euro Flat, British Pound Lower Against USD in Overnight Trading

Critical Levels



The Euro tried lower but rebounded late into the session to yield a flat result in Asian trading. The British Pound declined, testing as low as 1.6306. Technical positioning suggests the US Dollar is carving out a bottom against most major currencies.

Asia Session Highlights



Japan’s Merchandise Trade Balance surplus shrank to 380.2 billion yen in July, down from a revised 507.5 billion in June as imports grew 3% while exports shrank -1.3% from the previous month. The metric hit a record low in January 2009 and has since corrected higher, coinciding with acceleration in the growth of unemployment that has weighed on consumer spending, including that of foreign-made products. Indeed, in annual terms, the rate of contraction in inbound shipments (-40.8%) continues to outpace the drop in overseas sales (-36.5%). Still, the trade balance has been trending firmly lower since the surplus peaked in September 2007, the same month that US personal consumption of durable goods topped out and began to trend sharply lower. Although current economic growth forecasts suggest the US will outpace most industrial countries as the global recovery gains traction, chances are it will be some time before the American consumer is ready to meaningfully commit to big-ticket purchases such as Japanese cars and electronics. Indeed, a survey of economists conducted by Bloomberg calls for the external sector to add just 2.3% to overall growth on average this year and in 2010, the least in 9 years.

Euro Session: What to Expect



Germany’s IFO Survey of business confidence is expected to show that firms’ 6-month economic outlook improved for the eighth consecutive month in August. Still, the reading is expected at 92.0, a print below the 100 “boom-bust” threshold, suggesting conditions are still deteriorating but at a perpetually slower pace. Some recovery is to be expected as an array of fiscal stimulus both in Germany and abroad boost domestic demand and exports, but the big question in the Euro Zone’s top economy as well as most anywhere at this stage is whether growth is sustainable after the flow of government cash dries up. As it stands, a survey of economists conducted by Bloomberg suggests that Germany, and by extension the Euro region as a whole, will underperform most industrialized countries at least through the end of next year. The most pronounced differentials are seen against commodity-linked counties (Canada, Australia, and New Zealand) as well as the United States. A comparatively slower pace of economic growth will mean that Europe lags behind the curve as central banks begin to return to higher interest rates, a prospect that surely bodes ill for the single currency.

Written by Ilya Spivak, Currency Analyst
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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!