USD - Dollar Declines as Equity Market Rallies
The U.S Dollar fell against most of its major currency pairs yesterday, hitting its lowest level in nearly a year against the EUR, as gains in stocks and commodities prompted investors to wade into riskier currency trades. By yesterday's close, the USD fell against the EUR, pushing the oft-traded currency pair to 1.4603. The Dollar experienced similar behavior against the GBP and closed at 1.66.99.
The Dollar has fallen every day this week against the EUR and Japanese Yen, and it marked its third straight daily decline against the Pound Sterling yesterday. Analysts attributed the fall in the Dollar, which has been treated as a lower risk, safe-haven investment, to growing optimism that the worst of the financial crisis has passed. This has caused investors to buy commodity-linked and higher-yielding currencies, which rallied earlier this week.
A leading indicator released yesterday was U.S. Unemployment Claims. This number handedly beat last week's result. However, it failed to provide strength to the Dollar as investors may be waiting for key data due to be released today to implement their trading strategies.
Looking ahead to today, the most important economic indicator scheduled to be released from the U.S. is the Import Prices at 12:30 GMT. Traders will be paying close attention to today's announcement as a stronger than expected result may boost the USD in the short-term. Traders are also advised to follow Treasury Secretary Timothy Geithner's speech at around 20:45 GMT. This speech is very likely to impact USD volatility. Traders are advised to watch closely, as this is likely to set the pace of the Dollar going into next week's trading.
EUR - EUR/USD Hits One Year High
The EUR rose to session highs against the Dollar yesterday as U.S. stocks extended gains and commodity prices firmed. The 16 nation currency hit 1.4612 against the Dollar, a fresh 2009 high. The EUR was broadly unchanged versus the CHF yesterday, and closed its trading session at around the 1.5140 level.
The EUR was affected by the global stock market rally and the bearish Dollar. The U.S. stock market rally led investors to buy-back into the EUR, as they looked for returns on buying commodity-linked and higher-yielding currencies in Thursday's trading.
The Pound Sterling was actually the biggest mover amongst the majors, propelled higher by optimism about the UK economy and financial sector, and helped by a general move into riskier assets. Britain left Interest Rates at a record low of 0.50%, as it tries to get credit flowing again to strengthen an economy that may return to growth this quarter. Some reports show the outlook is brightening for Britain as Manufacturing Production rose 0.9pc in July in comparison to June. This was the biggest increase since January 2008.
Looking ahead to today, the most important economic indicator scheduled to be released from Britain is the PPI Input at 8:30 GMT. Analysts are forecasting this figure to increase from its previous reading. Traders will be paying close attention to today's announcement as a better than expected result may continue to boost the GBP in the short-term.
JPY - Yen Makes Big Gains on the Dollar
The Japanese Yen strengthened against most of its major counterparts on Thursday, continuing to prove that for the time being that this is the solid currency that traders can rely on to provide them with steady profits. The Yen extended gains versus the Dollar on Thursday, to trade at about 91.40 amid a broad sell-off in the USD. The JPY also saw bullishness against the EUR and closed at 133.60.
Investors worry over a recent rise in the JPY as it makes Japanese products less competitive abroad and hurts the value of overseas sales when translated back into the Japanese currency. With steady gains primarily against the Dollar, much of the Yen's bullish movement could be contributed to the repatriation of overseas earnings by Japanese companies into the local economy. This has had a positive effect on major JPY currency pairings, as the rising turmoil in the market is leading to more investment in the Japanese currency.
Crude Oil - Oil Prices Rise as Inventories Fall
Oil prices extended a four-day rally to near $72.30 a barrel on Thursday after a U.S. report showed a surprise decline in Crude Oil inventories, and OPEC said it would maintain official output curbs. Crude Oil rose 31 cents to settle at $72.24 a barrel, topping off a 6% climb since last Thursday.
Expectations that consumers may once again want more Oil when the recession bottoms have partly fueled the rally, with traders watching the stock market for economic telltales. There is a reasonable possibility that Oil prices will continue to be bullish going into next week, providing that the economic situation of the leading economies continues to rapidly improve.
Article Source - U.S. Prelim UoM Consumer Sentiment to Lead USD Trading Today
Key Overnight Developments
• Japan's Economy Grew Less Than Expected in the Second Quarter
• US Dollar Sold as Chinese Lending Tops Expectations, Boosting Risky Assets
The US Dollar continued to retreat in overnight trading, with the Euro testing above 1.46 while the British Pound pushed higher past the 1.67 level. Equity markets continued to advance in Asian trading, weighing on the safety-linked currency.
Asia Session Highlights
The final revision of Japan’s second-quarter Gross Domestic Product report revealed the economy grew less than economists predicted, adding 0.6% versus the originally reported 0.9%. Output expanded 2.3% from the previous year, much less than the 3.7% expansion quoted in initial estimates. Government spending and net exports drove growth higher for the first time in 15 months, supported by both domestic and overseas fiscal stimulus as well as the inventory cycle, while private demand shrank to shave -1.3% off total output. The question now facing Japan as well as most other developed countries is what happens when restocking runs its course and the flow of government cash invariably dries up. At this point, the likely answer sounds far from encouraging: the jobless picture continues to rise, driving spending lower; the trend in current account figures points lower, suggesting little future support from the external sector; and deepening deflation threatens to engineer another “lost decade” in the world’s second-largest economy.
A large dollop of Chinese economic data proved to weigh on the US Dollar, with the New Loans data of particular interest. Chinese banks lent out 410.4 billion yuan in August, much more than economists’ forecasts for a 320.0 billion result. Traders had been worried that the government would make good on their promises to rein in credit growth on fears that excessively loose monetary policy will produce speculative bubbles in the equities and property markets. The resilience in the loans data suggests there is still ample fuel to drive China’s heretofore robust economic recovery, giving risky assets a push higher and adding yet more selling pressure to the already beleaguered greenback.
Euro Session: What to Expect
The UK Producer Price Index report is set to show that wholesale costs declined for the fourth consecutive month, down -0.5% in the year to August. Excluding volatile items like food and energy however, prices are set to rebound a bit from the 5-year low of 0.2% recorded last month to grow 0.8%. A bit of a pickup is reasonable as economic growth stabilizes after the sharp declines earlier in the year, seeing support from both domestic and overseas fiscal stimulus as well as the inventory cycle. Indeed, London-based think tank NIESR reported yesterday that the economy grew for the first time in 14 months in the quarter to August, adding 0.2%. Still, NIESR director Martin Weale cautioned that “there way well be a period of stagnation now, with output rising in some months and falling in others…the end of the recession should not be confused with a return to normal economic conditions.” If this proves accurate, prices may fluctuate sideways in the months ahead. However, the mounting budget deficit (expected to average over 12% of GDP this year and in 2010) likely rules out any additional fiscal stimulus while any meaningful downward reversal in risky assets is likely to weigh on consumer confidence, coupling with rising unemployment to undermine private demand. Meanwhile, a stronger currency (up about 13% in trade weighted terms since the lows in December) and the completion of restocking are likely to drive export readings lower. Bottom line, while conditions have certainly improved from the lows in the first quarter, the economy’s ability to at least stay put at current levels seems questionable. On balance, this amounts to a dour outlook on price growth in the months ahead.
Written by Ilya Spivak, Currency Analyst
Article Source - US Dollar Sold as Chinese Lending Tops Expectations, Boosting Risky Assets (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.
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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!