Japan's Currency Hits a 7 Month High

The Yen rose to a 7 month high versus the Dollar as Japan's new government reiterated its opposition to pursuing deliberate currency devaluation strategy. The Sterling dropped to a 3 month low versus the Dollar last week after Bank of England Governor Mervyn King was quoted as saying the Pound's weakness is aiding in stabilizing the U.K.'s economy. Today's trading day will likely experience the markets reaction to the G20 leaders' decisions, mainly their pledge to continue supporting the stimulus efforts.

USD - USD Falls below 90.00 Yen

The Dollar weakened on Friday after a set of mixed U.S economic reports as well as reports that the G20 leaders will continue to provide support for the global economy. The Dollar index fell to 76.774 Friday, down from 76.901 late Thursday. The Dollar remained down more than 1% versus the Japanese Yen after statements by Japan's Finance Minister Hirohisa Fujii that he opposes intervening in the currency markets to curb the rise in the Yen.

Orders of durable goods unexpectedly fell 2.4% in August. Sales of new homes rose 0.7% to a 429,000 pace in August, much slower than the expected 442,000. On the other hand, the Reuters-University of Michigan consumer sentiment index was revised to 73.5 in September, compared to a previous estimate of 70.2 and 65.7 in August, beating analysts expectations.

No news events are expected today form the U.S; therefore, it is likely that Dollar sentiment will be determined by investors' reactions to the G20 concluding statements.

EUR - Sterling Trades at a 3 Month Low vs. USD

The Sterling dropped to a 3 month low below $1.60 last week after Bank of England (BOE) Governor Mervyn King was quoted stating the Pound's weakness is aiding in the recovery of the U.K economy. The EUR traded at $1.4665, up 0.2% from Thursday.

The Sterling slid 2.1% versus the Dollar last week following very dovish announcements by BOE Governor Mervyn King, calling the Pound's recent drop “very helpful.” The Pound fell Friday to $1.5918, the lowest level since June 8, and depreciated to 91.19 per ERU, the weakest level since April 1.

While a rather slow news day is expected today, ECB president Trichet's speech at 2:30 GMT is likely to provide volatility to the EUR as interest rate targets and exit strategies are likely to be discussed.

JPY - Yen at a 7 Month high versus the Dollar

The Yen registered sharp gains Friday, breaching the significant Y90.00 barrier against the Dollar and reaching the highest levels versus the greenback in over 7 months. Japan's currency benefited from supportive comments from Japan's finance minister Hirohisa Fujii who said that he opposes intentional devaluation of the Yen.

The JPY advanced 1.8% this week to 89.64 per Dollar from 91.29 on Sept. 18, briefly touching 89.51 Friday, the strongest level since Feb. 5. The currency also gained 2% to 131.70 per ERU, from 134.33.

Crude Oil - Crude Prices up Slightly on Mixed Data

At the end of a very volatile trading day Friday, Crude Oil futures rose slightly, for the first session in 3, following the release of mixed economic data from the U.S as well as on increased odds of broad based sanctions against Iran, the world's 4th largest Oil producer. Crude for November delivery rose 13 cents, or 0.2%, to end at $66.20 a barrel on the New York Mercantile Exchange, after dropping as low as $65.05, the lowest level since July 30. Overall futures tumbled more than 8% this week, the biggest weekly loss in more than two months.

The unexpected jump in the Reuters/UoM Consumer Sentiment Index to 73.5 in September helped push up Oil prices; however, concerns over weak demand dampened Friday's gains. Furthermore, several worse than expected economic data from the U.S stemmed further Oil's Gains.

With last Wednesday's report by the Energy Information Administration (EIA) stating that inventories of Crude Oil, gasoline and other petroleum products all rose last week and a lack of any significant economic news today, Oil prices will likely continue to stay subdued throughout today's trading day.

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Pound Tumbles, Dollar Surges as Risk Aversion Hits Currency Markets (Euro Open)

The US Dollar surged higher to start the trading week as stocks sold off across Asian exchanges, boosting demand for the safety-linked currency. The British Pound bore the brunt of the greenback’s assault as risk aversion compounded last week’s dovish rhetoric from the Bank of England.

Key Overnight Developments

• Pound Tumbles Despite BOE Backtracking on King’s Comments
• Japanese Yen Surges on Safety Demand as Stocks Plunge in Asia

Critical Levels

The British Pound and the Euro both suffered sharp losses in overnight trading as stocks tumbled in Asia, driven lower by Friday’s disappointing US economic data, sending the MSCI Asia Pacific regional benchmark index down 1.2% and boosting demand for the safety-linked US Dollar.

Asia Session Highlights

The British Pound raced sharply lower in early trading as currency markets seemingly concluded that the Bank of England suspiciously “protests too much” after the UK Times Online cited unnamed sources at the central bank as saying King was trying to talk down sterling last week. The Pound began to accelerate lower last Monday after the BOE released an article titled “Interpreting Recent Movements in Sterling” as part of its quarterly bulletin which argued that the inability of drying up capital inflows to finance the current account deficit could mean a fall in the “the long-run sustainable real exchange rate”. Sterling bears were given extra fuel last Thursday when Governor Mervyn King said rebalancing the UK economy was “very necessary [and] the fall in the exchange rate that we have seen will be helpful to that process” in an interview with The Journal.

Reserve Bank of Australia Governor Glenn Stevens struck a hawkish tone at a testimony to the Senate Committee in Sydney. Stevens said that Australia’s recession has been mild and the economy has done “quite well” as government stimulus “materially” supported growth, adding 2-3% to local demand. On interest rates, Stevens said that benchmark borrowing costs are “unusually low” and will need to go back to normal levels, adding that inflation targeting will guide the timing of adjustment to “more normal levels”.

Euro Session: What to Expect

A preliminary estimate of Germany’s Consumer Price Index is set to show that prices fell -0.2% in the year to September, marking the third consecutive month that the EU-harmonized metric has printed in negative territory. A reading in line with expectations is unlikely to prove market-moving: economists have called for year-on-year CPI to shrink -0.3% through the third quarter, and averaging September’s would-be reading with those recorded in the previous two months yields just about that outcome. The coming months present an opportunity for volatility, however: consensus forecasts have inflation coming back into positive territory in the fourth quarter and averaging around 1.2% through 2010; if this proves too rosy as the economy falters anew after the boost from fiscal stimulus (both at home and abroad) and the inventory cycle fizzles out, a drop in inflation expectations stands to prolong the slump in the Euro Zone’s largest economy. Indeed, consumers and businesses have little incentive to spend and invest in the present if they reckon prices will be lower in the future, bringing economic activity to a standstill. This will mean the ECB will keep interest rates at current lows longer than nearly all of its major counterparts (with the exception of Japan and Switzerland), weighing down the Euro.

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.


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!