USD - Greenback Rises on Safe Haven Buying
The dollar put in a strong showing for a second day versus most of the major currencies. Traders were quick to buy the dollar following a Wall Street Journal article that highlighted European banks' exposure to risky government bonds that were previously not reported in this summer's European banking stress tests. While the article did not bring to light any new information that was not previously known in the FX market, it did refocus the spotlight on weakness in the European financial system.
Less than expected German factory orders hurt risk sentiment in the market. The change in the in the total value of new purchase orders from manufactures fell by 2.2% over the previous month. Expectations were for an increase of 0.6%.
The lone data release from the US will be the Fed's Beige Book, set to be released at 18:00 GMT. The Fed's analysis of the markets helps the central bank set policy decisions and interest rate levels.
The EUR/USD has declined for the past two days, pulling back into the symmetrical triangle pattern that had formed. Support is found at the rising lower leg of the triangle pattern at a price of 1.2660 followed by 1.2580.
EUR - European Banking Fears Drops Euro
A lack of economic data from the US had traders looking to Europe for signals on the direction of the major currencies. A Wall Street Journal article influenced traders and reignited fears of the European fiscal crisis. Also weak German factory orders did little to calm traders' nerves about the state of the euro zone economy.
Fiscal troubles in Ireland also hurt the euro. The Irish Finance Minister said he does not expect Ireland to seek emergency loans from the EU and Ireland will resume its regular capital raising activities from the public debt markets. However, the market reaction did not emphasize this statement. The spread between Irish government debt and safe haven German debt rose to an all-time high.
Further signs of traders' aversion to risky assets were apparent as the DAX was down 0.6% and the euro was lower versus the major currencies. The EUR/USD fell to 1.2680, from an opening day price of 1.2806. The EUR/CHF fell to a fresh all-time low at 1.2808.
Significant data releases are on the British economic calendar for today. Traders will be looking at the Halifax HPI and the monthly manufacturing production numbers. Better than expected data may help support the weakening pound. Support and resistance levels for the GBP/USD are found at 1.5320 and 1.5490.
JPY - Interest Rate Decisions from Japan and Australia
As expected, both the Bank of Japan (BOJ) and the Royal Bank of Australia (RBA) left interest rates steady at 0.10% and 4.50% respectively.
The BOJ stated the bank is continually monitoring the outlook for economic activity and did not change its economic forecasts. The BOJ also sees a continued moderate economic recovery in the Japanese economy.
The RBA also held its base rate steady while the accompanying rate statement indicated that policy is appropriate for the time being but it did highlight some uncertainty in the market. Also newly elected Prime Minister Julia Gillard successfully formed a minority government.
Continued European banking worries touched off a bout of safe haven buying. The yen was one of the benefactors in yesterday's trading. The USD/JPY dropped to a 15-year low at 83.50 before finally closing at 83.79. Should safe haven buying continue, the USD/JPY could push its all-time low at 79.70.
OIL - Recovery Fears Weaken Spot Crude Oil
The price of spot crude oil fell during yesterday's trading following renewed concerns over the global economic recovery. This time around it was Europe that sparked fears of a weakened banking system and fiscal concerns in Ireland.
Spot crude oil prices fell to $73.80, after opening the day at $74.04.
Also affecting the price of spot crude oil was a strengthening dollar. As the dollar appreciates, this makes it more expensive for holders of foreign currencies to by crude oil.
Traders may have been influenced by an explosion at a Mexican government owned oil refinery near the US Mexico border. This sparked worries over short term supplies and helped to reduce the overall drop in spot crude oil prices.
The weekly crude oil inventories release from the US Department of Energy Administration is scheduled for Thursday due to the shortened holiday week in the US. Expectations are for an increase of 300K barrels.
Support and resistance for spot crude oil prices come in at $71 and $75.70
The pair has recorded much bearish behavior in the last 2 days. However, the technical data indicates that this trend may reverse anytime soon. For example, the daily chart's Stochastic Slow signals that a bullish reversal is imminent. An upward trend today is also supported by the RSI. Going long with tight stops may turn out to pay off today.
The cross has been dropping for the past month now, as it now stands at the 1.5380 level. However, the daily chart's RSI is already floating in the oversold territory indicating that a bullish correction might take place in the nearest future. Going long with tight stops may turn out to be the right choice today.
The USD/JPY has gone increasingly bearish yesterday, and currently stands at the 83.47 level. The daily chart's Slow Stochastic supports this currency cross to fall further today. However, the hourly chart's Stochastic Slow signals that a bullish reversal will take place today. Entering the pair when the signs are clearer seems to be the wise choice today.
This pair's sustained downward movement has finally pushed its price into the over-sold territory on the daily chart's RSI. Not only that, but there actually appears to be a bullish cross on the Slow Stochastic pointing to an imminent downward correction. Forex traders have the opportunity to wait for the upwardward breach on the hourlies and go long in order to ride out the impending wave
Crude Oil is displaying significant bearish signals after yesterday's failed breach of the $75 price level. The hourly chart has the pair trading in the overbought zone on the pair's Relative Strength Index, indicating a possible move lower. The chart also shows a bearish cross has formed on the Slow Stochastic Oscillator that may support this downward move. Forex and commodity traders may want to be short on Crude Oil today as a significant price move may be in the making.
Article Source - Dollar Rallies on Weak German Data
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!