USD - Dollar Rises on Optimistic Manufacturing Data
The U.S dollar rose against most of its major currency pairs yesterday as sharp losses in global stock markets offset stronger-than-expected U.S. manufacturing data and boosted the greenback's safe-haven appeal. As a result, the USD finished yesterday trading session 150 pips higher against the EUR at the1.4216 level. The greenback also saw bullishness against the GBP and closed at 1.6155.
The main factors effecting Dollar volatility yesterday were the releases of optimistic U.S manufacturing data and Pending Home Sales figures. The U.S. manufacturing sector expanded in August for the first time in 19 months, while home sales contract hit a two-year high in July, helping lead the economy out of the worst recession and thus boosted the demand for the Dollar. Factories and builders, which have accounted for half of all the jobs lost since the recession began in December 2007, may keep growing in coming months as sales rise.
Traders will be keeping a close eye on U.S. Non-Farm Employment Change data due at 12:15 GMT, which is expected to decrease to -250K from -371k. Special attention should also be given to the Crude Oil inventory which is expected to decrease from previous reading. Investors pay close attention to this figure as it has a strong correlation with the value of the U.S. Dollar.
EUR - EUR Erases Gains After High Jobless Figures
The EUR was little changed, erasing earlier gains, after figures showing Europe's manufacturing industry continued to contract in August stoked investor concern that the global recession has further to run. The EUR fell against the USD, pushing the oft-traded currency pair to 1.4220. Despite positive data on Tuesday that showed Euro-Zone purchasing managers' index (PMI) rise and German unemployment unexpectedly fell in August, the EUR failed to make headway on the data as falls in equities weighed.
The Sterling erased its early gains against the U.S dollar and the EUR after an unexpected dip in UK manufacturing activity in August, stoking concerns about the pace of recovery in the British economy. The GBP was down 0.8% at $1.6152 and was little changed against the EUR at 88.04 pence.
Looking ahead to today, the most important economic indicator scheduled to be released from the Euro-Zone is the Revised GDP at 9:00 GMT. Analysts are forecasting this figure to be unchanged from its previous reading. Traders will be paying close attention to today's announcement as a stronger than expected result may boost the EUR in the short-term. Traders are also advised to follow the Construction PMI figures coming out of Britain at 8:30 GMT, and the ADP Non-Farm Employment Change figures coming out of the U.S. at 12:15 GMT as these results may set the EUR's main currency crosses going into today's trading.
JPY - The Yen Spikes to a 7 Week High
The JPY experienced a bullish trading session yesterday, as it appreciated against most of its major currency pairs. The Japanese yen traded near a 7 week high against the Dollar amid speculation asset prices are overblown, boosting demand for the relative safety of the Japanese currency.
The Yen was close to its strongest level versus the U.S dollar in more than a month after Asian shares slumped and CIT Group Inc. deferred interest payments on subordinated bonds. The Yen tends to gain in times of financial turmoil as Japan's trade surplus reduces reliance on foreign capital, while the Dollar benefits from its status as the world's main reserve currency.
Traders expect the Yen to continue benefiting for the rest of the week amid growing concern that any more pullback in equities could be a further drag on a global economic recovery.
Crude Oil - Crude Declines 3% As Stocks Drop and USD Strengthens
Crude Oil experienced another day of depreciation as prices fell nearly 3% to $68.04 in this morning's early trading session. Oil prices traded down for the second straight day yesterday as economic concerns sent investors into safer havens, outweighing positive U.S. manufacturing and home sales data. The declines came after U.S. stocks dropped as renewed worries about the health of the U.S. financial sector shook investor confidence.
As for today, the Crude Oil inventories figures will be released. Expectations show a drop to -0.8M from last week's of 0.2MM. Traders can, and should, expect wide market volatility around the 14:00 GMT release of these inventories figures because of Crude Oil's recent importance to today's market.
Article Source - The USD Benefits as Wall Street Slides
Key Overnight Developments
• Australian Dollar Gains on GDP But Stock Drop Limits Upside
• Euro, British Pound Range-Bound in Overnight Trading
The Euro was confined to a narrow range 35-pip range above 1.4190 in overnight trading. The British Pound followed suit, oscillating in a 60-pip band below 1.6180.
Asia Session Highlights
Australia’s Gross Domestic Product grew 0.6% in the second quarter, topping economists’ expectations of a 0.2% result. The annual pace of economic growth advanced to 0.6%, rebounding from the 18-year low of 0.3% in the three months to March. The details of the report appear encouraging: private consumption and investment both advanced, the former by the largest margin since the fourth quarter of 2007 and the latter by the most since the three months through September of last year. Still, the acceleration seems to be a testament to the effects of the government’s ample fiscal package, including A$20 billion in cash handouts to households and A$22 billion in infrastructure spending, and the big question going forward will be whether the economy can maintain momentum once the flow of stimulus cash dries up. The Australian Dollar surged 50 pips against its US counterpart in the hour following the release but failed to meaningfully build on that momentum as stocks dropped nearly 2% in Asian trading, weighing down the risk-linked currency. Indeed, a trade-weighted average of the Australian unit’s value is now 95.6% correlated with the MSCI World Stock Index.
Euro Session: What to Expect
The second revision of the Euro Zone’s Gross Domestic Product is set to confirm that the economy shrank -0.1% in the second quarter. The annual pace of contraction is expected to be revised slightly higher from -4.6% to -4.7%, but this is unlikely to be enough to stir the currency markets. Rather, traders will be looking at the expected upward revisions to the Household Consumption and Gross Fixed Capital components of the metric. An increasing number of market observers (ourselves included) are skeptical about whether the recent upswing in economic data around the globe is sustainable after the flow of government stimulus cash dries up. To this effect, measures of consumption and investment are going to be critical at this point in gauging whether a meaningful rebound in private demand can pick up where fiscal measures leave off.
In the UK, Construction PMI is set to rise to 48.0 in August from 47.0 in the previous month, showing that the industry shrank at the slowest pace in at least 13 months. However, the analogous metric for the manufacturing sector unexpectedly declined yesterday, suggesting rising unemployment may be starting to become a meaningful drag on leading indicators and opening the door for a downside surprise in today’s report.
Written by Ilya Spivak, Currency Analyst
Article Source - Australian Dollar Gains on GDP But Stock Drop Limits Upside (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!