USD - USD Setback Caused by Market Uncertainty
The US Dollar dropped slightly yesterday as equity markets began to slow the pace of their recovery. Erasing part of Tuesday's gains, the EUR/USD retraced itself back towards 1.4300 at the opening of US markets as stocks slowly recovered, and the EUR followed suit against the greenback. Similar behavior was experienced against the British Pound as well, with a price reaching towards 1.6300 as of yesterday's late trading hours.
Economic recovery does not appear to be improving at the speed many investors were hoping for, and currencies appear to be tracing the movement of stocks as a result. While recovery floats between positive and negative economic data, risk appetite may be suffering as a result; hence the surge in the value of the JPY. One thing is certain, the economic news expected for today and tomorrow will no doubt generate an intense level of trading volume and volatility as investors try to price in the new growth forecasts for Europe and unemployment levels for the United States.
For today, traders need to be watching 3 currencies: the AUD, EUR, and USD. Australia released its trade balance figures this morning, which showed a deeper contraction than was expected, putting downward pressure on the Aussie. The European Central Bank will release its decision on short-term interest rates, which always creates volatility. Also, the US is going to give a glimpse into tomorrow's NFP report with today's Unemployment Claims figures. These will be the more exciting news days for trading that an investor can get. Make sure you're in the market today!
EUR - Euro-Zone Interest Rate Decision Today at 11:45 GMT
While rallying against the USD yesterday, the EUR faced a moderate setback versus the British Pound and Yen. Climbing towards 1.4300 against the USD, the EUR dropped to as low as 0.8750 versus the Pound Sterling and 131.30 compared to the Yen.
The price behavior of the EUR these past few days has been to mimic the movement of stocks, since most economic data has failed to provide a clear signal about market direction. Since global stocks are inching their way towards positive growth, the EUR also inched its way up against its primary rival. However, the lack of optimism meant that the safe-haven JPY continued to gain momentum against all of its rivals.
For today, EUR traders have an important economic event to be on the lookout for. The European Central Bank (ECB) is going to announce its decision regarding its Minimum Bid Rate (short-term interest rates for the region), and could also potentially give hints about its economic growth forecasts for the next 6 months. Any indication of a rate increase in the next half-year could spell heavy optimism for the EUR and traders would be foolish to miss out on this event.
JPY - Yen Continues to Gain from Risk Aversion
Sitting on top of a mountain of bullish growth, the Japanese Yen has been on the receiving end of much optimism lately, or should we say, a lack of optimism. The uncertainty in the market lately has pushed many investors away from even the modestly risky currencies and into the safety of the Yen, which helps explain its recent strength.
Whether or not this momentum can carry itself into the near future, however, may be decided by the news events today and tomorrow from Europe and the United States. The ECB will announce its rate decisions today, as well as any updates about economic outlook. This decision always carries a strong impact and may see the EUR/JPY head into an upward correction directly after its release if the ECB brings good news. American employment data today and tomorrow may also help reverse the recent trend of the USD/JPY. Traders beware, today is going to be a bumpy ride!
Crude Oil - Commodities Spike, but Crude Oil Remains Flat
Unlike yesterday's Gold prices, Crude Oil failed to see any bullish growth following the opening of the US markets at 12:30 GMT. Once the New York markets opened, the USD faced a modest downturn against the EUR while stocks gained slightly. As a result, the price of precious metals, such as Gold and Silver, spiked drastically while the price for a barrel of Crude Oil remained relatively flat at $68.
With so much news affecting the stock market and forex, many traders tend to overlook the benefits of commodity trading. Crude Oil tends to be an investment with a lot of potential as it moves in large wave trends with fewer volatile spikes, making it one of the safer investments for a portfolio looking for a hedge against inflation, or away from the volatility of many currencies. Today's and tomorrow's news releases about European interest rates and American employment data are expected to create a heavy level of volume and volatility, meaning most commodities will experience something similar. Don't miss out on these opportunities if you're an active forex trader.
Article Source - U.S. Unemployment Claims to Set the Level for the USD Today
Key Overnight Developments
• Australia’s Trade Deficit Widens as Stimulus Boosts Imports
• Euro, British Pound Range-Bound in Overnight Trading
The Euro was confined to a narrow 30-pip range in the overnight session, trading sideways above 1.4260. The British Pound followed suit, oscillating in a 40 pip band above 1.6240.
Asia Session Highlights
Australia’s Trade Balance deficit widened much more than economists expected in July, showing a shortfall of –A$1.5 billion, the largest in 15 months. Preliminary forecasts ahead of the release had called for a –A$0.9 billion result. The previous month’s reading was also revised down to –A$0.54 billion from the –A$0.44 billion originally reported. The gap expanded as imports surged 4%, driven by a 21% increase in oil shipments. Imports of consumer goods advanced 2%, owing to overseas purchases of vehicles, food, and beverages. Exports fell 1%, led by a hefty 27% drop in cross-border gold sales. On the face of it, the data paints an encouraging picture of the Australian economy: rising oil demand (primarily in the form of industrial fuel and lubricants) points to an increase in production and hints at possible improvement in the employment situation while the increase in consumer demand is good news for the spending climate and thereby overall economic growth. However, not all is as rosy as it seems: much like yesterday’s surprisingly strong second-quarter GDP result, the surge in Australian demand evident in today’s data likely owes the government’s ample fiscal package, including A$20 billion in cash handouts to households and A$22 billion in infrastructure spending. Indeed, as we have previously suggested, the big question going forward will be whether the now buoyant Australian economy can maintain momentum once the flow of stimulus cash dries up.
Euro Session: What to Expect
The European Central Bank will take center stage in the coming trading session, with Jean-Claude Trichet and company expected to keep interest rates unchanged at 1% for the fourth consecutive month. The announcement’s market-moving potential rests on the bank’s update to its economic outlook for the Euro Zone, with any downward revisions likely to weigh heavily on the single currency. The currency bloc’s problems are well-documented. Deflation is becoming an increasingly real concern as CPI figures continue to print in negative territory. Unemployment continues to rise, threatening the outlook for spending and thereby overall economic growth. In fact, the pace of contraction in Retail Sales is set to accelerate to -2.2% in July. Finally, the banking sector is yet to come to terms with an estimated $1.1 trillion in unrealized sub-prime related losses (according to the IMF), a hit that could be compounded by defaults or devaluations in some of the newly-minted central European EU member states that are struggling with meeting their obligations to Western European lenders. Indeed, it is perhaps the prospect of these very losses that has undermined the ECB’s attempt to stimulate economic activity by allowing overnight borrowing costs to hover well below the 1% target level between 0.5 and 0.3 percent since June, with lending to the private sector growing at a record low 0.6% in July. The recent batch of economic indicators has painted an optimistic picture, boosted by a global wave of fiscal stimulus, broad inventory restocking efforts, and firming financial markets. How this will factor into the ECB’s world view rests entirely on whether the bank sees the current stabilization as the beginning of a sustainable recovery or a temporary reprieve.
In the UK, Services PMI is set to rise to 54.0 in August from 53.2.0 in the previous month, showing that the industry expanded at the fastest pace since February 2008. However, the analogous metrics for the manufacturing and construction sectors both disappointed, 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 - Euro in Focus as ECB Announces Interest Rates, Updates Economic Outlook (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!