9.14.2009

Obama Speech to Impact Dollar

The Dollar is likely to go volatile during and following the speech by President Obama today at 16:00 GMT. Meanwhile, forex traders are advised to take positions on trades, as a few of data releases coming out of Euro-Zone and Britain are likely to affect the greenback's main currency crosses.



USD - Dollar Finishes a Week of Falling Trends

During last week's trading session, traders that went short on the dollar made profits. The dollar dropped over 300 pips against the Euro, around 400 pips against the Pound, and slid about 350 pips against the Yen.

The Dollar weakened in light of some negative data published from the U.S economy. The U.S Trade Balance report for July showed that the difference between imports and exports increased by 16 percent, the most since 1999. The gap rose to $32 billion from a revised $27.5 billion in June. Also last week, The U.S Consumer Credit, which measures the change in the total value of outstanding consumer credit that requires installment payments, dropped by 21.6$ billion in July.

The end result of this indicator was five times lower than forecasted by analysis, and thus has a negative impact on the Dollar. The Unemployment data from the U.S continues to be bleak. It's been the 35th week in a raw on which over 500,000 individuals have filed for unemployment insurance for the first time. It appears that until the employment condition will take a turn for the better, the Dollar might continue to weaken.

Looking ahead to this week, a batch of data is expected from the U.S economy, including the Retails Sales Indices, the Producer Price Induces, the Consumer Price Indices, the Long-Term Purchases, the Building Permits and the weekly Unemployment Claims. Traders are advised to follow all these publications very closely as positive result from these indicators might have the potential to reverse the current bearish trend of the greenback.

EUR - Mixed Results from the Euro-Zone Creates Volatility for the EUR

The Euro underwent a very volatile session during last week's trading. The EUR rose significantly against the Dollar, lifting the EUR/USD pair above the 1.4600 level. However the Euro dropped against the Yen, and saw mixed results against the Pound.

The Euro began last week's session with rising trends against the major currencies thanks to a positive Factory Orders figures from the German economy. This indicator measures the change in the total value of new purchase orders placed with manufacturers. Analysts predicted a rise of 2.0% during July, yet the end result showed that factory orders rose by 3.5%, increasing for the fifth consecutive month.

However the bullish trend reached its end following poor Industrial Production data from both Germany and France. This indicator is a leasing indicator of economic health as production reacts quickly to ups and downs in the business cycle. Thus, the negative figures showed that it is still soon to declare that the Euro-Zone has pulled out of recession, and that the leading economies of the Euro-Zone are still tumbling.

As for this week, many interesting publication are expected from the Euro-Zone. The data which seems to have the potential to impact the Euro the most is the German ZEW Economic Sentiment report, expected on Tuesday 09:00 GMT. It is a survey of about 350 German institutional investors and analysts who are asked to rate the next 6-months economic outlook for Germany. This report usually has an immense effect on the market, and a positive figure might have the potential to boost the EUR.

JPY - JPY Rises Against the Majors

The Yen rose last week against all the major currencies. The Yen appreciated about 350 pips against the Dollar, sending the USD/JPY pair as low as the 90.16 level. The Yen also soared around 200 pips against the Euro and about 350 pips against the Pound, marking an all around bullish session.

The Yen's sharp bullish movements last week appears to be a correction to the over-weak Yen. It is a widely known that the Bank of Japan (BoJ) sees the weak Yen as the main tool to support the Japanese exporters in the attempt to recover the economy. Japan continues to hold the lowest Interest Rates in the industrial world, and the BoJ is making other steps as well, all in the effort to weaken the Yen. The key target that exporters are holding for the USD/JPY pair is around 94.50, and a lower rate might have severe consequences on the Japanese economy. However for now it seems that investors are still seeing the Yen as a safer haven then most of the major currencies and thus the JPY continues to strengthen.

As for the week ahead, The Japanese Interest Rates for September will be declared on Thursday. The BoJ is likely to leave interest rates, also knows as Overnight Call Rate at 0.10%. However, in case that the BoJ will surprise and will choose to alter rates, this is likely to have a large impact on the Yen. Either way, traders are advised to follow the press conference which is expected short after, as some interesting slues regarding future monetary system might be scattered.

Crude Oil - Crude Oil Drops towards $68 a Barrel

Last week's trading session started with a massive bullish trend for crude oil, which lasted until Friday. A barrel of crude oil was traded for 72.50 at its peak. However, a sudden change happened then, dropping crude oil towards $68 a barrel.

It seems that oil prices dropped as a result of an appreciation of the Dollar since Friday, and some concerns that Crude Oil became over-valued following a week of straight rising trends. It also looks that a few unsatisfying results for financial indicators have increased fear that global economies may not recover as soon as expected, which will likely weaken demand for oil.

Looking ahead to this week, traders are advised to follow the Dollar's value, and the U.S equity markets, as they tend to set the tone in crude oil trading. In addition, traders should also pay attention to the Crude Oil Inventories report scheduled for Wednesday, as its result has proven to have a large impact on crude oil's value.

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US Dollar Surges as Stocks Drop in Asian Trading, Boosting Demand for Safety (Euro Open)

The US Dollar raced higher to start the trading week as stocks sold off in Asian trading and US equity index futures pointed to a sharply lower open on Wall St in the day ahead. New Zealand Retail Sales unexpectedly fell in July. Swiss PPI and Euro Zone employment and industrial production figures are on tap ahead.

Key Overnight Developments

• New Zealand Retail Sales Unexpectedly Drop in July as Unemployment Rises
• US Dollar Surges As Stocks Drop in Asian Trading, Boosting Demand for Safety

Critical Levels



The US Dollar pummeled both the Euro and the British Pound to start the trading week, with both currencies falling as much as -0.6% against the greenback as stocks sold off in Asian trading and US equity index futures pointed to a sharply lower open on Wall St in the day ahead. The MSCI Asia Pacific Index slid -1.5% while futures tracking the Dow Jones Industrial Average suggested US issues would open down 1.6%.

Asia Session Highlights



New Zealand Retail Sales unexpectedly fell in July, shrinking -0.5% and disappointing expectations of a 0.4% result. The previous month’s result was also revised lower, showing sales fell -0.1% rather than grew by the same magnitude as was originally reported. The release reinforces last week’s comments from Reserve Bank of New Zealand Governor Alan Bollard, who said the medium term outlook for retail spending “remains weak” as unemployment continues to rise. Indeed, the jobless rate hit a 9-year high of 6% in the second quarter and central bank expects it to surpass 7% by the end of next year. Bollard also linked continued turmoil in the labor market to the New Zealand Dollar, saying the stronger currency puts business profits “under pressure” and warning that “If the exchange rate were to continue its recent appreciation…the sustainability of the present recovery will be brought into question.”

Euro Session: What to Expect



The annualized pace of contraction in Switzerland’s Producer and Import Prices is expected to have slowed to -5.5% in August from the record-low -6.1% set in July. The outcome follows a similar moderation in consumer prices during the same period and foreshadows slightly better results for the headline inflation gauge in the months ahead. However, as we detailed in our weekly Swiss Franc forecast, it is much too early to say that the specter of deflation has dissipated, so the Swiss National Bank is unlikely to abandon their commitment to direct intervention into the currency markets to keep down the value of the Franc when monetary policy is announced later this week.

The second-quarter Euro Zone Employment report is unlikely to prove market-moving: traders have likely priced in the state of the market already having seen the monthly unemployment gauge rising steadily higher since June of last year, most recently hitting a record 9.5%. Separately, Industrial Production is expected to shrink -16.7% in the year to July, extending the moderation in the pace of contraction that began after the record -21.2% annualized drop in April driven by both domestic and global fiscal stimulus as well as the inventory restocking cycle. However, a downside surprise may be in the cards after German industrial production unexpectedly fell during the same period.

Written by Ilya Spivak, Currency Analyst
Article Source - US Dollar Surges as Stocks Drop in Asian Trading, Boosting Demand for Safety (Euro Open)
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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!