9.13.2010

Euro Maintains Bullish Trend as We Start the Week

Following solid economic news out of China released last Friday, the euro, as well as other so-called riskier currencies, has maintained an upward trend going into this week. That being said, analysts are warning that these gains may only be temporary. Overall economic sentiment regarding the euro zone is still fairly pessimistic. The slightest bit of bad news could cause investors to revert back to the safe haven US dollar and yen, which would lead to a drop for euro pairs.



USD - USD Starts Busy Week Down vs. Majors

Despite the significant gains the US dollar made in the first half of last week, a sudden switch to risk-taking among investors eventually caused the currency to slide back into a bearish trajectory. As we start off the week, the greenback continues to lose ground. The EUR/USD pair has gone up over 100 pips since markets opened, and is currently trading around the 1.2790 level. The USD/CAD dropped over 50 pips in overnight trading, reaching as low as 1.0311 before making a slight recovery. Currently the pair stands at around the 1.0325 level.

Today, USD crosses will likely fluctuate based on what ECB President Jean-Claude Trichet says in his speech. Pessimism in the euro zone economies is still relatively high. Should the ECB's president reflect this sentiment in his speech, the dollar is likely to make steady gains as investors return to safer assets like the greenback.

As for the week ahead, traders will want to pay attention to a batch of potentially significant US economic data. Tuesday's Retail Sales reports, as well as Thursday's PPI figure and Unemployment Claims, will likely dictate the direction of dollar pairs for some time. Any gains made in the US economy will likely lead to bullish movement for the buck.

EUR - Analysts Question How Long Euro Can Maintain Current Trend

The euro was able to move up against most of its main currency rivals, including the Japanese yen and UK pound, in overnight trading. The gains can largely be attributed to renewed investor confidence, following positive Chinese data released last week. Since markets opened for the week, the EUR/JPY has gone up around 90 pips, while the EUR/GBP moved up close to 50 pips.

While the euro has been able to make some fairly significant gains as of late, most analysts are questioning how long the currency can maintain this trend. Confidence in the euro zone economic recovery remains particularly low. Today's speech from ECB President Trichet may highlight these concerns; in which case euro crosses may correct themselves later in the day.

As for the week ahead, traders will want to pay attention to a number of potentially impacting news events. Tuesday's German ZEW Economic Sentiment figure as well as Wednesday's CPI and Core CPI figures are all predicted to create market volatility. Traders will want to note that should any of these results come in below analyst predictions, the euro will likely move down as a result.

JPY - Yen Corrects Earlier Gains as Risk Taking Returns

The yen corrected much of its recent gains in trading late last week and into overnight trading today. Positive Chinese economic news, as well as better than expected American labor news are seen as the leading causes for the return to risk taking.

As a result, the yen took some heavy losses against the euro and Swiss franc beginning last Friday. The one exception appears to be the US dollar. After beginning the week with slight upward movement, the USD/JPY pair has since dropped close to 30 pips and is currently trading around the 84.05 level.

This week, yen traders will want to pay attention to European and US economic news. Positive news is likely to give further confidence to investors in the global economic recovery. If so, then the yen will likely continue to lose ground against its main currency rivals.

Crude Oil - Optimism in US Recovery Causes Crude Prices to Soar

Positive US economic news, as well as the most recent US Crude Oil Inventories report has led to a prolonged upward trend for crude prices that appears to be continuing into this week. Crude prices are largely determined by the state of the US economy. Following a number of positive indicators last week, oil demand in the world's largest energy consuming nation appears to be on the rise.

Since beginning its most recent bullish trend late last week, oil prices have shot up over 300 pips. Currently, a barrel of crude goes for around $77.10. Traders will want to pay careful attention to US economic indicators this week in order to determine the direction crude is likely to take. Should the news again come in above expectations, prices are likely move up further.

Technical News

EUR/USD

There appears to be a fresh bearish cross on the hourly Stochastic (slow), indicating an impending short-term correction for the pair. The 4-hour Stochastic (slow) is also climbing towards the over-bought region and could also form a bearish cross later in the day if upward momentum does not change in the next few hours. Going short with tight stops may be a wise way to gain quick profits in intra-day trading today.

GBP/USD

This pair appears to be trading within a distinct bearish channel, and has recently touched the upper border of this trend. The hourly Stochastic (slow) has a fresh bearish cross, while its RSI may also be just entering the over-bought territory. Short-term downward movements may be expected throughout the first half of the trading day. Selling this pair for short-term profits may be a wise move today.

USD/JPY

Most indicators on this pair appear to be floating in the neutral territory, suggesting the current trend may continue. The long-term movement of this pair is in a very distinct bearish channel spanning the last few months. The only indicator which appears to suggest an upward correction is the weekly chart's RSI, which has the price of the pair floating just within the over-sold territory. Continuing with the downward direction by opening short positions may prove a smart decision for this pair.

USD/CHF

The hourly Stochastic (slow) on this pair appears to be showing a recent bullish cross, suggesting upward movement may be imminent. The hourly RSI also floats in the over-sold territory, which supports this notion. Additionally, the weekly chart's RSI has the price of this pair floating deep within the over-sold region and beginning to turn upward. Longer-term upward movements may be expected on this pair.

Crude Oil

The recent bullish movements on this pair have pushed many indicators into corrective territory. The hourly, 4-hourly, and daily charts' RSIs all have the price in the over-bought territory. The Stochastic (slow) on all three of these charts also shows either a fresh or an impending bearish cross. Forex traders can usually be certain that after such strong movements there will be similarly strong counter-movements, and Crude Oil is no exception. Going short on oil today may not be a bad idea.

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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!