Tuesday, November 10, 2009
How does this transaction work in 5 simple steps?
STEP 1:
Well first of all you need to open an account with currency today that’s very easy, that can be done on the internet by registering your details there and then submitting to me a minimum, a copy of your passport and you send that to me by scanning and emailing, that’s the ideal method or by post obviously that will be slower, faxes unfortunately are not acceptable due to most faxes coming through unreadable.
STEP2:
Second step that you need to make after discussing your requirements with me and actually between ourselves you deciding to go ahead and buy you currency you need to book a rate, in order to book a rate you can do that between normal office hours 8.30am to 6pm over the telephone and I can confirm the exchange rate with you at the time and the date in which you need to make a payment or settlement in sterling or if your selling currency over to us.
STEP 3:
Thirdly you need to send your money to us, now there’s three main methods for sending funds over to us before we can then send your currency on, or if you were selling currency to send the currency to us before we can return your sterling.
The first method for doing this is the most popular method especially for smaller sums, that’s sums below £10,000 and that’s internet banking, so that’s where you can literally go onto your internet banking log in select add a new payee you can put the payee details for the royal bank of Scotland in there, click submit obviously including the amount and any reference and the reference would also include either your surname or your unique reference with us when you set up an account and then you can press submit and we'll receive your funds usually between the same day and three working days.
The other option which is less popular but is still an option available to you is to call your bank direct and ask them to do a transfer to our account by giving them our account details with the royal bank of Scotland and asking them to send the money straight over to us the only problem with that is like internet banking which I didn't mention a minute ago there is actually a £10,000 limit which you have to adhere to so anything above £10,000 you will have to send us a separate transaction or you may even have to wait until the next day before your limit is lifted and then you can send another £10,000.
The last option which is most popular for transactions over £10,000 and for anything urgent, so if you need to get money urgently over to an account overseas, or if you need to bring currency back and receive your sterling very quickly then you need to look at doing a chaps transfer, a chaps transfer does cost between £20 and £30 but the advantage of doing a chaps transfer is that the money will come the same day sometimes within a matter of minutes to our bank account. In order for us to then send your currency on to the designated beneficiary bank account of your choice.
STEP 4:
The forth option is to send your onward payment details to us that’s where you want the person to be paid or the company to be paid overseas or even yourself overseas there is a form to complete which you need to fill out now for European payments you need to have on there the account name, the bank name the iban number the swift code and the amount you wish to send. For anything outside the euro zone for America you usually need an account number and an ABA or routing number and then there’s vary other codes for countries like Australia which work on BSB numbers and account numbers but without getting you too confused at this stage there is a form you need to complete with all the correct details for the beneficial banking you want to pay that you need to provide to us as soon as you can ready for when your funds arrive and your currency needs to be sent.
STEP 5:
The last stage of this process, that’s step five, is for you to receive a payment confirmation that will always be sent to you on the day of your payment being sent you'd usually receive that by 6pm on that given day unless you were looking to send an exotic currency which does not include the euro, Australian dollar, US dollar, etc so I’m talking about currencies like United Arab dirham’s, Moroccan dirham’s etc unless those one of those currencies you will receive payment conformation same day and which you can then use that for proof that your money has been sent.
Make The Currency
In the stock market, a trader has the opportunity to choose from more than 5,000 companies - hundreds of which will rally in the most vicious of bear markets and thousands of which will crash during the strongest of bull runs. But in the currency market, such divergent possibilities do not seem to exist. In this article, we'll look at how forex traders can use currency crosses to make a wide variety of trades that are unaffected by the day-to-day fluctuations of the greenback.
All Currency Bets Are the Same
When dealing in the major currency pairs, most traders are presented with only one choice: dollar bull or dollar bear? Regardless of whether a trader is long the GBP/USD (British pound-U.S. dollar) or the EUR/USD (euro-dollar), or short the USD/CHF (dollar-Swiss franc) or USD/JPY (dollar-Japanese yen), the unifying theme in all of these positions is that the trader is bearish on the greenback. Therefore, the question of which of the four trades should be taken is immaterial, since all of them will likely be profitable if the dollar is weak and all will lose money if the dollar is strong.
Granted, this may sound like a gross oversimplification of the forex market. We'll be the first to acknowledge that some currencies can and do challenge this paradigm - the Canadian dollar is one good recent example of such a dynamic. Buoyed by skyrocketing oil prices, the loonie has turned into a petrocurrency as Canada has become the United States' No.1 supplier of crude. As a result, while other major currencies like the euro, the yen and the pound have recently declined against the U.S. dollar, the Canadian dollar has gained in value. However, this is an exception that proves the rule.
To better understand how this works, let's take a look at the two charts below. Figure 1 looks at the performance of the seven most liquid currency pairs in forex, composed of the four majors:
• EUR/USD
• USD/JPY
• GBP/USD
• USD/CHF
and the three commodity pairs:
• USD/CAD
• AUD/USD
• NZD/USD
Figure 1 looks at activity on a single trading day - Oct 12, 2005. To normalize the data, we converted every pair so that its performance could be analyzed accurately. Typically, if the dollar were weak, the EUR/USD would rise and the USD/CHF would decline; however, in Figure 1 we have made the adjustment so that the returns are consistent vis a vis the dollar
All Currency Bets Are the Same
When dealing in the major currency pairs, most traders are presented with only one choice: dollar bull or dollar bear? Regardless of whether a trader is long the GBP/USD (British pound-U.S. dollar) or the EUR/USD (euro-dollar), or short the USD/CHF (dollar-Swiss franc) or USD/JPY (dollar-Japanese yen), the unifying theme in all of these positions is that the trader is bearish on the greenback. Therefore, the question of which of the four trades should be taken is immaterial, since all of them will likely be profitable if the dollar is weak and all will lose money if the dollar is strong.
Granted, this may sound like a gross oversimplification of the forex market. We'll be the first to acknowledge that some currencies can and do challenge this paradigm - the Canadian dollar is one good recent example of such a dynamic. Buoyed by skyrocketing oil prices, the loonie has turned into a petrocurrency as Canada has become the United States' No.1 supplier of crude. As a result, while other major currencies like the euro, the yen and the pound have recently declined against the U.S. dollar, the Canadian dollar has gained in value. However, this is an exception that proves the rule.
To better understand how this works, let's take a look at the two charts below. Figure 1 looks at the performance of the seven most liquid currency pairs in forex, composed of the four majors:
• EUR/USD
• USD/JPY
• GBP/USD
• USD/CHF
and the three commodity pairs:
• USD/CAD
• AUD/USD
• NZD/USD
Figure 1 looks at activity on a single trading day - Oct 12, 2005. To normalize the data, we converted every pair so that its performance could be analyzed accurately. Typically, if the dollar were weak, the EUR/USD would rise and the USD/CHF would decline; however, in Figure 1 we have made the adjustment so that the returns are consistent vis a vis the dollar
Friday, November 6, 2009
Personal Income and Spending
Impact: Medium
Data: Bureau of Economic analysis
Release time: 30 days after the month in survey
Frequency: Monthly
Source: Bureau of Economic Analysis
Revisions: Monthly
It is a comprehensive monthly summary of personal income and spending, produced by the Bureau of Economic Analysis (BEA). The report collects data about the individuals' income sources and his expenditure. The report also contains data for the widely watched inflation indicator known as the personal consumption expenditures (PCE).
Why is it important?
Though this monthly indicator is not as comprehensive as the quarterly GDP report, its timeliness is very important especially when economic trends are perceived to be nearing a turning point. This data can provide a monthly evaluation source as investors await the quarterly data. Monitoring of this report and a combination of other indicators can give hints on the direction and strength of the economy, as well as an insight into the Federal Reserve’s next move regarding short-term interest rates. The report also evaluates the ability and willingness of consumers to spend which is very important because consumer spending accounts for nearly two-thirds of the overall economic activity.
How is it computed?
The computation of this data takes two separate approaches that must combine to get the overall result. This is a compilation of the personal income then calculation of the spending. These two categories are further subdivided in specific groupings. To start with, the personal income includes wages and salaries, supplements to wages and salaries, proprietors’ income, social benefits and net insurance settlements. On the other hand personal spending takes into account all moneys spent on personal consumption expenditures such as durable and non-durable goods and services, interest payments and transfer payments such as fines to the federal government, donations, fees and other payments that may be made to other governments out of the U.S. Both the incomes and spending are balanced to get the true situation of the population’s income and spending report.
How does it affect the forex trade?
Monetary policy and where it is perceived to be headed play a major role with the direction of investment decisions. If the trend in the report is rising in a way that hints income and spending are overheating, bond prices could fall on the outlook for greater overall economic demand, potentially higher inflation and an increased chance that the Federal Reserve will hike interest rates. The Federal Reserve Bank’s interest rates are a major factor in the shaping of the economic landscape and the rates will indirectly affect the forex rates as the country introduces stimulus to reactivate the economic performance. A rise in income and spending readings can depict economic strength while declining readings typically reflect economic weakness. All these situations are bound to impact directly on the forex rates.
How does it affect the stock market?
There is a scenario where stock prices could experience a temporary lift if the prevailing economic trend is subdued. Incase the income and expenditure trends hint at an economic rebound from a weak economic period, a boost in stock prices may be eminent even with an expected rise in bond yields. That is because the market's expectation of potentially higher profit growth from greater economic demand can be the more influential factor in driving stock prices higher. Thus, it can be the more-dominant factor driving stock prices for a period, overshadowing even the negative impact of rising bond yields. At times, monthly income may not necessarily change the spending pattern simply because income earners may opt to suspend their spending for different reasons ranging from anticipated drop in commodity prices to the fear that they may soon. If however the imbalance persists it might as well imply that money is being earned locally but the income owners are holding it to invest in other economies thus if they don’t seem to trust the future of the local economy. This may lead to a slow down at the stock markets.
Spending breaks are more likely to occur when there is an impending change in government such as during election time. People are likely to hold spending especially if the people are optimistic of a new government that they believe may make changes on the economic policies that are in turn likely to affect the economic landscape in a big way. Although spending breaks may not mean the economy is declining, it may cause temporary price drops at the stock market before investors start spending freely again.
Data: Bureau of Economic analysis
Release time: 30 days after the month in survey
Frequency: Monthly
Source: Bureau of Economic Analysis
Revisions: Monthly
It is a comprehensive monthly summary of personal income and spending, produced by the Bureau of Economic Analysis (BEA). The report collects data about the individuals' income sources and his expenditure. The report also contains data for the widely watched inflation indicator known as the personal consumption expenditures (PCE).
Why is it important?
Though this monthly indicator is not as comprehensive as the quarterly GDP report, its timeliness is very important especially when economic trends are perceived to be nearing a turning point. This data can provide a monthly evaluation source as investors await the quarterly data. Monitoring of this report and a combination of other indicators can give hints on the direction and strength of the economy, as well as an insight into the Federal Reserve’s next move regarding short-term interest rates. The report also evaluates the ability and willingness of consumers to spend which is very important because consumer spending accounts for nearly two-thirds of the overall economic activity.
How is it computed?
The computation of this data takes two separate approaches that must combine to get the overall result. This is a compilation of the personal income then calculation of the spending. These two categories are further subdivided in specific groupings. To start with, the personal income includes wages and salaries, supplements to wages and salaries, proprietors’ income, social benefits and net insurance settlements. On the other hand personal spending takes into account all moneys spent on personal consumption expenditures such as durable and non-durable goods and services, interest payments and transfer payments such as fines to the federal government, donations, fees and other payments that may be made to other governments out of the U.S. Both the incomes and spending are balanced to get the true situation of the population’s income and spending report.
How does it affect the forex trade?
Monetary policy and where it is perceived to be headed play a major role with the direction of investment decisions. If the trend in the report is rising in a way that hints income and spending are overheating, bond prices could fall on the outlook for greater overall economic demand, potentially higher inflation and an increased chance that the Federal Reserve will hike interest rates. The Federal Reserve Bank’s interest rates are a major factor in the shaping of the economic landscape and the rates will indirectly affect the forex rates as the country introduces stimulus to reactivate the economic performance. A rise in income and spending readings can depict economic strength while declining readings typically reflect economic weakness. All these situations are bound to impact directly on the forex rates.
How does it affect the stock market?
There is a scenario where stock prices could experience a temporary lift if the prevailing economic trend is subdued. Incase the income and expenditure trends hint at an economic rebound from a weak economic period, a boost in stock prices may be eminent even with an expected rise in bond yields. That is because the market's expectation of potentially higher profit growth from greater economic demand can be the more influential factor in driving stock prices higher. Thus, it can be the more-dominant factor driving stock prices for a period, overshadowing even the negative impact of rising bond yields. At times, monthly income may not necessarily change the spending pattern simply because income earners may opt to suspend their spending for different reasons ranging from anticipated drop in commodity prices to the fear that they may soon. If however the imbalance persists it might as well imply that money is being earned locally but the income owners are holding it to invest in other economies thus if they don’t seem to trust the future of the local economy. This may lead to a slow down at the stock markets.
Spending breaks are more likely to occur when there is an impending change in government such as during election time. People are likely to hold spending especially if the people are optimistic of a new government that they believe may make changes on the economic policies that are in turn likely to affect the economic landscape in a big way. Although spending breaks may not mean the economy is declining, it may cause temporary price drops at the stock market before investors start spending freely again.
import and Export Prices
Impact: High
Data: Bureau of Labor Statistics
Release time: Between 12th and 15th of the month following the survey
Frequency: Varies
Source: Bureau of Labor Statistics
Revisions: Monthly
A price index tracks purchasing power by measuring how the price of goods and services is changing. The export and import price indices are used to show the value and prices of goods and services getting into and out of the U.S. market. The index uses a benchmark approach, similar to the CPI, to measure the change in U.S. dollar prices of goods or services purchased from abroad by U.S. residents as well as the goods and services sold to the foreign market from the U.S.
How important is it?
Although it is a backward looking indicator, export and import prices have a big influence in the interest rates, the economy as well as the stock and bond markets. This is because import and export prices are a clear indication of the economic performance of U.S products and services both locally and abroad.
The export and Import Price Index is also important since it is used to help gauge the impact on inflation from changes in the value of the U.S. dollar. It has an inverse relationship, whereby a lower dollar typically leads to higher import inflation, and vice versa. The impact occurs with a lag, which can vary by industry from a few months to a few years. Although the index has two segments thus the export and import segments, less attention is paid to the export portion since it does not feed into overall U.S. inflation rates.
How is it calculated?
It is calculated using a benchmark approach that compares a household's cost for a specific basket of finished goods and services with the cost of the same basket during an earlier benchmark period (reference base, which is the average index level for 1982-84). The weight given to each basket item is fixed.
How does it affect the forex?
Stocks and bonds typically fall in reaction to higher-than-expected price index readings (inflation), more so when the economy is growing above its potential. This happens because undesirable rates of inflation can hurt the valuation of stocks and bonds, a situation that may create the perception that the Federal Reserve Bank is likely to raise interest rates. Such imaginations in the investment fraternity may eventually result to a slow down in economic activity.
On the other hand, lower-than-expected price index readings can lift the prices of stocks and bonds, even though there are acceptable limits with stocks. Rising bond prices and falling bond yields may enhance the relative attractiveness of stocks. However, stocks can suffer if price index readings keep declining, especially if the economy is growing below its potential because it implies slower corporate profit growth as consumers postpone purchases. In a situation where import prices prove to be far more than export prices, the current account balance may experience deficits leading to a drop in the dollar value. If such situations persist, then the international demand for the dollar may decline with investors viewing it as a weak currency. This may further affect the overall trends in international trade of goods and services.
How does it affect the stock market?
Investors at the stock market generally watch this index as it gives an insight into the trend of the market in days to come. If the index balances well in favor of any sector, investors are likely to shift their attention to the said, sector and raise its share price due to increased demand. Since the import and export index is influential in setting up the country’s monetary policy, it is quite advisable for any investor to keep track of the events in order to make strategic investment decisions before the Federal Reserve Bank takes any measures that may affect your profits in a negative way.
Federal Reserve Bank interest rates are adjusted in respect to these indices, factor which makes investors to consider it as a main indicator on the trends of interest rates to come. It is wise to calculate your investment earnings against the inflation or existing interest rates since at times high interest rates may mean you end up getting far much less than you had anticipated. Such circumstances may force investors to sell their holdings in stock and buy bonds and vice versa to counter any effects that may be brought about by the changes in interest rates.
Data: Bureau of Labor Statistics
Release time: Between 12th and 15th of the month following the survey
Frequency: Varies
Source: Bureau of Labor Statistics
Revisions: Monthly
A price index tracks purchasing power by measuring how the price of goods and services is changing. The export and import price indices are used to show the value and prices of goods and services getting into and out of the U.S. market. The index uses a benchmark approach, similar to the CPI, to measure the change in U.S. dollar prices of goods or services purchased from abroad by U.S. residents as well as the goods and services sold to the foreign market from the U.S.
How important is it?
Although it is a backward looking indicator, export and import prices have a big influence in the interest rates, the economy as well as the stock and bond markets. This is because import and export prices are a clear indication of the economic performance of U.S products and services both locally and abroad.
The export and Import Price Index is also important since it is used to help gauge the impact on inflation from changes in the value of the U.S. dollar. It has an inverse relationship, whereby a lower dollar typically leads to higher import inflation, and vice versa. The impact occurs with a lag, which can vary by industry from a few months to a few years. Although the index has two segments thus the export and import segments, less attention is paid to the export portion since it does not feed into overall U.S. inflation rates.
How is it calculated?
It is calculated using a benchmark approach that compares a household's cost for a specific basket of finished goods and services with the cost of the same basket during an earlier benchmark period (reference base, which is the average index level for 1982-84). The weight given to each basket item is fixed.
How does it affect the forex?
Stocks and bonds typically fall in reaction to higher-than-expected price index readings (inflation), more so when the economy is growing above its potential. This happens because undesirable rates of inflation can hurt the valuation of stocks and bonds, a situation that may create the perception that the Federal Reserve Bank is likely to raise interest rates. Such imaginations in the investment fraternity may eventually result to a slow down in economic activity.
On the other hand, lower-than-expected price index readings can lift the prices of stocks and bonds, even though there are acceptable limits with stocks. Rising bond prices and falling bond yields may enhance the relative attractiveness of stocks. However, stocks can suffer if price index readings keep declining, especially if the economy is growing below its potential because it implies slower corporate profit growth as consumers postpone purchases. In a situation where import prices prove to be far more than export prices, the current account balance may experience deficits leading to a drop in the dollar value. If such situations persist, then the international demand for the dollar may decline with investors viewing it as a weak currency. This may further affect the overall trends in international trade of goods and services.
How does it affect the stock market?
Investors at the stock market generally watch this index as it gives an insight into the trend of the market in days to come. If the index balances well in favor of any sector, investors are likely to shift their attention to the said, sector and raise its share price due to increased demand. Since the import and export index is influential in setting up the country’s monetary policy, it is quite advisable for any investor to keep track of the events in order to make strategic investment decisions before the Federal Reserve Bank takes any measures that may affect your profits in a negative way.
Federal Reserve Bank interest rates are adjusted in respect to these indices, factor which makes investors to consider it as a main indicator on the trends of interest rates to come. It is wise to calculate your investment earnings against the inflation or existing interest rates since at times high interest rates may mean you end up getting far much less than you had anticipated. Such circumstances may force investors to sell their holdings in stock and buy bonds and vice versa to counter any effects that may be brought about by the changes in interest rates.
Chicago Purchasing Managers Index (PMI)
Impact: Medium
Data: Chicago Purchasing Managers Association
Release time: .00 am on the last working day of the month
Frequency: Monthly
Source: Chicago Purchasing Managers Association
Revisions: One year
A Purchasing Managers Index (PMI) is an economic indicator; it is a composite index based on five major indicators including new orders, inventory levels, production, supplier deliveries, and the employment environment. Each indicator has a different weight and the data is adjusted for seasonal factors.
How important is it?
One key area of the report is growth in new orders, which predicts manufacturing activity in future months. Should this PMI report an unexpected change, dramatic reactions automatically follow at the stock market. The Chicago PMI report is an extremely important indicator for the financial markets as it is the best indicator of factory production. The index is popular for detecting inflationary pressure as well as manufacturing economic activity, both of which investors pay close attention to. The PMI is not as strong as the CPI in detecting inflation, but because the data is released one day after the month, it is very timely hence quite relevant in making future investment decisions. The Chicago PMI index is perceived by market traders to be a good leading indicator for the ISM, which typically affects the financial markets largely.
How is it computed?
The Institute of Supply Management produces the report. It is an opinion survey and relies on people’s perceptions, not data. It also does not capture any technology improvements or increasing production efficiencies that might alter expectations and actual results. The survey captures opinions of over two hundred purchasing managers in the manufacturing industry in the Chicago Federal Reserve Region. This region covers Illinois, Iowa, Indiana, Michigan and Wisconsin areas since this was the region considered to represent the U.S. manufacturing industry. A PMI index over 50 indicates that manufacturing is expanding while anything below 50 means that the industry is contracting.
How does it affect the forex rates?
The right balance of international trade generally influences forex rates. Although the report may not immediately result in forex rate changes, it may eventually affect forex in the long term together with a combination of other factors. Supposing the report indicates a sharp decline in purchases of manufacturing raw materials, the result may be a massive decline in production activity in the days to come. A decline in production automatically translates into a decline in exports, which will eventually reduce the country’s forex reserves especially if the decline in local production may force the country to rely on imported products to meet the local population’s demand. This scenario may not only affect the forex rates but also the general growth of the economy as a whole.
On the other hand, if the report indicates an increase in manufacturing material purchases, the economy is on the growth path and the effects can be visible within the next few weeks. This means an increase in production and most probably, exports will increase too leading to high forex reserves that will eventually strengthen the dollar against other international currencies. This correlation with other indicators may make it an influencing factor in the making of monetary policies. Since it actually acts as a prediction of the ISM index, it has a great influence on the Federal Reserve Bank’s short-term changes in interest rates.
How does it affect the stock market?
The effect of this index on the stock market cannot be underestimated. Investors always need to have an insight into possible future occurrences in the sectors they invest in; there is no better way of doing this other than by having a glimpse at the upcoming orders that have been made by purchasing managers in these sectors. This is because the orders can clearly give a clear picture of what to expect in the near future. If the index indicates a possible decline in economic activity due to fewer orders, investors may be very swift at moving their holdings in a bid to try to safeguard their stocks from losing value in the anticipated decline. This may lead to sudden price changes on the particular shares perceived to be headed for a decline in performance. Since it comes a day prior to the release of the ISM, if it predicts an unexpected change in the ISM, it is likely to spark off massive activity as investors try to act in response to its indication.
Data: Chicago Purchasing Managers Association
Release time: .00 am on the last working day of the month
Frequency: Monthly
Source: Chicago Purchasing Managers Association
Revisions: One year
A Purchasing Managers Index (PMI) is an economic indicator; it is a composite index based on five major indicators including new orders, inventory levels, production, supplier deliveries, and the employment environment. Each indicator has a different weight and the data is adjusted for seasonal factors.
How important is it?
One key area of the report is growth in new orders, which predicts manufacturing activity in future months. Should this PMI report an unexpected change, dramatic reactions automatically follow at the stock market. The Chicago PMI report is an extremely important indicator for the financial markets as it is the best indicator of factory production. The index is popular for detecting inflationary pressure as well as manufacturing economic activity, both of which investors pay close attention to. The PMI is not as strong as the CPI in detecting inflation, but because the data is released one day after the month, it is very timely hence quite relevant in making future investment decisions. The Chicago PMI index is perceived by market traders to be a good leading indicator for the ISM, which typically affects the financial markets largely.
How is it computed?
The Institute of Supply Management produces the report. It is an opinion survey and relies on people’s perceptions, not data. It also does not capture any technology improvements or increasing production efficiencies that might alter expectations and actual results. The survey captures opinions of over two hundred purchasing managers in the manufacturing industry in the Chicago Federal Reserve Region. This region covers Illinois, Iowa, Indiana, Michigan and Wisconsin areas since this was the region considered to represent the U.S. manufacturing industry. A PMI index over 50 indicates that manufacturing is expanding while anything below 50 means that the industry is contracting.
How does it affect the forex rates?
The right balance of international trade generally influences forex rates. Although the report may not immediately result in forex rate changes, it may eventually affect forex in the long term together with a combination of other factors. Supposing the report indicates a sharp decline in purchases of manufacturing raw materials, the result may be a massive decline in production activity in the days to come. A decline in production automatically translates into a decline in exports, which will eventually reduce the country’s forex reserves especially if the decline in local production may force the country to rely on imported products to meet the local population’s demand. This scenario may not only affect the forex rates but also the general growth of the economy as a whole.
On the other hand, if the report indicates an increase in manufacturing material purchases, the economy is on the growth path and the effects can be visible within the next few weeks. This means an increase in production and most probably, exports will increase too leading to high forex reserves that will eventually strengthen the dollar against other international currencies. This correlation with other indicators may make it an influencing factor in the making of monetary policies. Since it actually acts as a prediction of the ISM index, it has a great influence on the Federal Reserve Bank’s short-term changes in interest rates.
How does it affect the stock market?
The effect of this index on the stock market cannot be underestimated. Investors always need to have an insight into possible future occurrences in the sectors they invest in; there is no better way of doing this other than by having a glimpse at the upcoming orders that have been made by purchasing managers in these sectors. This is because the orders can clearly give a clear picture of what to expect in the near future. If the index indicates a possible decline in economic activity due to fewer orders, investors may be very swift at moving their holdings in a bid to try to safeguard their stocks from losing value in the anticipated decline. This may lead to sudden price changes on the particular shares perceived to be headed for a decline in performance. Since it comes a day prior to the release of the ISM, if it predicts an unexpected change in the ISM, it is likely to spark off massive activity as investors try to act in response to its indication.
Affect the stock market?
A high accumulation of business inventories signals a decline in purchasing power. Investors only make money out of their investments if goods are moving at a good pace and turnovers are high. It is therefore needless to say that an accumulation of business inventories spells doom to any investor. The business inventories report together with the sales report can give an elaborate insight into the pace of the market. Judging on these two factors, it is clear that the report is likely to course some change in the stock market prices. If investors read the possibility of an oncoming recession, they would hastily try to exit the market and look for better places to invest even if it means crossing international boundaries. This situation would see a sudden drop in share prices as the market losses its demand for the same.
However, in the event that business inventories decline at a good pace, the market would be registering good turnovers and that would make it a very viable investment choice for many. It would therefore be automatic that the increase in demand would lead to an increase in share prices since every investor wants a share of any profitable business.
However, in the event that business inventories decline at a good pace, the market would be registering good turnovers and that would make it a very viable investment choice for many. It would therefore be automatic that the increase in demand would lead to an increase in share prices since every investor wants a share of any profitable business.
How does it affect forex?
Inventory accumulation during a sluggish economic period may force producers into offloading unwanted inventories. Such a move will no doubt affect the manufacturer a great deal since some expense will have been incurred in the production and again it may force the producers to cut down production. While a slower production may be good news for bond market since it thrives on low interest rates, foreign exchange investors will see a weaker dollar as a result. Sudden accumulation of business inventories may also mean the beginning of a recession.
If business inventories accumulation persists. It is obvious that the export and import business will be greatly affected leading to a possible trade imbalance. The trade imbalance will then directly affect the strength of the dollar. On the other hand if business inventory figures decline drastically, the dollar may see renewed demand although too sudden a decline in business inventories may also signify an eminent increase in inflation levels.
If business inventories accumulation persists. It is obvious that the export and import business will be greatly affected leading to a possible trade imbalance. The trade imbalance will then directly affect the strength of the dollar. On the other hand if business inventory figures decline drastically, the dollar may see renewed demand although too sudden a decline in business inventories may also signify an eminent increase in inflation levels.
Business Inventories
This is a report that entails a breakdown of all business orders that are lying in the manufacturers’ stores, the traders’ stores and in all retail outlets across the country. There are two version of the report - one for manufacturing sector and the other for non-manufacturing sector. Together, these two reports cover close to 90% of the economy. The report is used to establish the amount of backlog of goods and services that are in the stores of traders with a view to finding just how long the goods may stay before being sold.
How important is it?
This report is important in the since that it helps investors and trades as well as manufacturers to tell at what pace the economy is growing. By getting an idea about how much of the produced goods are still stuck in stores across the country, manufacturers may be able to gauge whether to increase production or to reduce it. It is also a clear indicator of the economic growth rate. if the business inventory figures escalate suddenly it could well mean that the economy is headed for a decline. If the same figures reduced drastically over a period, then it is also clear that the economy has started moving towards growth. The two ISM reports reveal the strength of the economy, earnings and a peek into Federal Government's future moves pertaining interest rates.
How is it computed?
The report contains data from a survey of both the manufacturing as well as the non-manufacturing sectors. While the manufacturing sector covers all manufacturing factory goods, the focus of the non-manufacturing ISM report is a 10 components indicator from the service, construction, mining as well as agricultural-based industries, including: supplier deliveries, new orders, prices, backlog of orders, business activity, employment, imports, business inventories, new export orders and inventory sentiments. Incase an investor is interested a more accurate assessment of the forex trend using this report, it would be very advisable for such persons to check the business inventory figures against sales to get an inventories to sales ratio.
Three New Ways to Use RSI in Forex
J. Welles Wilder’s Relative Strength Index (RSI) measures the strength of the currency pair against its history of price change by comparing the number of days the pair is up in price to the number of days it is down. Values range from 0 to 100. A common use is as a warning of market tops and bottoms, based on Wilder’s idea that overbought and oversold conditions occur after disproportionate moves. If it’s over 70, one might short; if it’s below 30, one might buy. In an earlier article, I described how you can use RSI for divergence trades.
Here are three other ways to use RSI:
First is what Wilder called a failure swing. This happens when RSI exceeds a previous extreme (overbought above 70 or oversold below 20), corrects, and then heads for that extreme but fails to achieve it. You would place a trade on the close of the candle that corresponds to the second peak or dip.
Here’s an example from the hourly EURJPY chart. Price and RSI are rising in tandem. RSI becomes overbought, above 70. Both correct. They again rise but the second peak of RSI is lower than the first. You’d sell on the close of the candle that accompanied the lower peak.
If price and RSI were falling the situation is reversed. When the indicator becomes oversold below 30, corrects, and then fails to reach the prior low, you’d buy on the candle close. Confirming the trade with other evidence—for example, support or resistance or candlesticks—is advisable.
A second use of RSI involves support and resistance, not with price, but on the indicator itself. It can help you gauge if a trend is changing.
Here you would watch the indicator to ascertain that it never rises above (in a down trend) or falls below (in an up trend) key levels. Studying past RSI behavior helps you find these levels.
The 15-minute chart of GBP/USD provides an example. Price and RSI are rising. Price then becomes congested and RSI starts to drop. Is this a simple correction or is the trend changing? Examining RSI provides a clue. RSI never drops below 43. This is above the last dip in RSI and far above an oversold reading of 30. On the second dip in price, with the RSI holding above 43, the trader can feel confident this is a correction and buy on the candle close of the second dip. A safer trade would involve waiting until price broke and closed above the congestion top. As always, it’s best to find other evidence to support the trade decision such as price support and resistance levels, candlesticks, or a comparison with other indicators.
Here are three other ways to use RSI:
First is what Wilder called a failure swing. This happens when RSI exceeds a previous extreme (overbought above 70 or oversold below 20), corrects, and then heads for that extreme but fails to achieve it. You would place a trade on the close of the candle that corresponds to the second peak or dip.
Here’s an example from the hourly EURJPY chart. Price and RSI are rising in tandem. RSI becomes overbought, above 70. Both correct. They again rise but the second peak of RSI is lower than the first. You’d sell on the close of the candle that accompanied the lower peak.
If price and RSI were falling the situation is reversed. When the indicator becomes oversold below 30, corrects, and then fails to reach the prior low, you’d buy on the candle close. Confirming the trade with other evidence—for example, support or resistance or candlesticks—is advisable.
A second use of RSI involves support and resistance, not with price, but on the indicator itself. It can help you gauge if a trend is changing.
Here you would watch the indicator to ascertain that it never rises above (in a down trend) or falls below (in an up trend) key levels. Studying past RSI behavior helps you find these levels.
The 15-minute chart of GBP/USD provides an example. Price and RSI are rising. Price then becomes congested and RSI starts to drop. Is this a simple correction or is the trend changing? Examining RSI provides a clue. RSI never drops below 43. This is above the last dip in RSI and far above an oversold reading of 30. On the second dip in price, with the RSI holding above 43, the trader can feel confident this is a correction and buy on the candle close of the second dip. A safer trade would involve waiting until price broke and closed above the congestion top. As always, it’s best to find other evidence to support the trade decision such as price support and resistance levels, candlesticks, or a comparison with other indicators.
Bullish pressure will increase above 1.4700 - Mizuho
The Euro is building up after bouncing from 1.4625 low on Tuesday, reaching levels right below 1.4900 and the pair bullish momentum will increase if it remains above 1.4700, according to Nicole Elliott, senior technical analyst at Mizuho Corporate Bank.
Euro bullish pressure will accelerate, while above the 50-day MA, says Elliott: "Indecision with yesterday’s ‘doji’ candle. Bullish pressure might increase fractionally if we hold above the 50-day moving average at 1.4700."
Euro bullish pressure will accelerate, while above the 50-day MA, says Elliott: "Indecision with yesterday’s ‘doji’ candle. Bullish pressure might increase fractionally if we hold above the 50-day moving average at 1.4700."
Security and Safety
What kind of safety and security measures are taken to protect my transactions?
Literally, the best. Forex Trading First treats the issues of data security, privacy, integrity and backup with the utmost attention and care. This is achieved through:
• Ensuring authorized access only, Forex Trading First uses two layers of top class firewall: one at the server level and one at the application level.
• For user authentication and data transfer Forex Trading First uses an advanced SSL by Verisign
• Separating the application servers (the servers that handle our clients' online activity) from the transaction information: those are stored on a different data server.
• For data recovery, integrity and replication Forex Trading First uses two different server farms, physically located away from each other. Data has to be synchronized in both locations, thus cannot be tampered with. All the information on the servers is stored encrypted.
• The physical security of each server farm is very high. Armed guards are situated 24 hours a day, and access to the premises is strictly forbidden except for authorized personnel.
We make sure that whatever happens: failure, disaster, etc. your transactions are intact, secure, and backed up.
Literally, the best. Forex Trading First treats the issues of data security, privacy, integrity and backup with the utmost attention and care. This is achieved through:
• Ensuring authorized access only, Forex Trading First uses two layers of top class firewall: one at the server level and one at the application level.
• For user authentication and data transfer Forex Trading First uses an advanced SSL by Verisign
• Separating the application servers (the servers that handle our clients' online activity) from the transaction information: those are stored on a different data server.
• For data recovery, integrity and replication Forex Trading First uses two different server farms, physically located away from each other. Data has to be synchronized in both locations, thus cannot be tampered with. All the information on the servers is stored encrypted.
• The physical security of each server farm is very high. Armed guards are situated 24 hours a day, and access to the premises is strictly forbidden except for authorized personnel.
We make sure that whatever happens: failure, disaster, etc. your transactions are intact, secure, and backed up.
Live training, one-on-one help on first steps in online trading
Do they offer professional assisting tools?
Forex Trading First offers background information for the Forex market, Guided-Tour, seminars, one-on-one training, CHAT, telephone support, as well as other assistance tools, including technical support. You are never left alone to trade without help, if indeed you need it. Moreover, your personal Account Service Manager will guide you live, on your first trading steps, to help you get acquainted with the Forex Trading First system, and will answer your technical questions.
Forex Trading First offers background information for the Forex market, Guided-Tour, seminars, one-on-one training, CHAT, telephone support, as well as other assistance tools, including technical support. You are never left alone to trade without help, if indeed you need it. Moreover, your personal Account Service Manager will guide you live, on your first trading steps, to help you get acquainted with the Forex Trading First system, and will answer your technical questions.
Personal Account Management
Anybody there?
Are there real people behind the phone (or the e-mail box)?
Do I speak with the same person, managing the service to my Forex account and providing the personal touch and assistance, online?
Forex Trading First expert team members are available for you, at all times, anytime. Moreover, you have your own Account Service Manager working closely with you, and the dealing room services are offered to you by expert Forex dealers. You may speak with us over the phone, over e-mail, or over the advanced online CHAT system that we run, as well as visit your regional office and meet in person. Yes, it's internet, but we are real, and we take it personally
Are there real people behind the phone (or the e-mail box)?
Do I speak with the same person, managing the service to my Forex account and providing the personal touch and assistance, online?
Forex Trading First expert team members are available for you, at all times, anytime. Moreover, you have your own Account Service Manager working closely with you, and the dealing room services are offered to you by expert Forex dealers. You may speak with us over the phone, over e-mail, or over the advanced online CHAT system that we run, as well as visit your regional office and meet in person. Yes, it's internet, but we are real, and we take it personally
Guaranteed Rates and Stop-Loss
Is it "around", or "near" the rate I set, or rather exactly on it?
Forex Trading First guarantees your Stop-Loss rate by using the latest technologies. We are committed to the principle that you never lose more than your Stop-Loss amount at risk, as defined by you.
As well, per your pre-set TAKE-PROFIT rate (if you choose to set such rate) your deal will be automatically closed, exactly on your pre-defined Take-Profit rate.
Needless to say that you can change those pre-defined rates, Stop-Loss as well as Take-Profit, at any time while your deal is open.
Forex Trading First guarantees your Stop-Loss rate by using the latest technologies. We are committed to the principle that you never lose more than your Stop-Loss amount at risk, as defined by you.
As well, per your pre-set TAKE-PROFIT rate (if you choose to set such rate) your deal will be automatically closed, exactly on your pre-defined Take-Profit rate.
Needless to say that you can change those pre-defined rates, Stop-Loss as well as Take-Profit, at any time while your deal is open.
Start trading in less than 5 minutes
Are there any tedious procedures needed for account set-up?
Can I immediately register, deposit the margins for the deal, and start running?
Of course you can, especially when you have no software to download, and you have the option to use your credit card for depositing the margin required for the trading. Please note that due to security measures, aimed to protect you, the Forex trader, the scope of deals on the first week of new users trading with Forex Trading First is limited. Such restriction will be removed after making a phone contact with our team.
Margin trading with as little as US$25
What is the lowest amount I can risk and deal Forex with?
The Forex Trading First system enables you to trade with small amounts as well. You can start using Forex Trading First even with an amount as little as $25! No bank would ever offer you such an opportunity! When trading, you may deposit the sum that suits you, or fits the amount that you are willing to risk. Starting to trade with such small amounts is the best way to get acquainted with the Forex marketplace. Much better than operating "DEMO" accounts, where you are not really risking your own money. After getting familiar with the system, you may increase your level and scope of activity, as you find fit.
Can I immediately register, deposit the margins for the deal, and start running?
Of course you can, especially when you have no software to download, and you have the option to use your credit card for depositing the margin required for the trading. Please note that due to security measures, aimed to protect you, the Forex trader, the scope of deals on the first week of new users trading with Forex Trading First is limited. Such restriction will be removed after making a phone contact with our team.
Margin trading with as little as US$25
What is the lowest amount I can risk and deal Forex with?
The Forex Trading First system enables you to trade with small amounts as well. You can start using Forex Trading First even with an amount as little as $25! No bank would ever offer you such an opportunity! When trading, you may deposit the sum that suits you, or fits the amount that you are willing to risk. Starting to trade with such small amounts is the best way to get acquainted with the Forex marketplace. Much better than operating "DEMO" accounts, where you are not really risking your own money. After getting familiar with the system, you may increase your level and scope of activity, as you find fit.
Freeze the Rate you see and trade Forex online
When I select a rate for a deal, can I "FREEZE" it for a few seconds, before I should make my final decision?
Do I have enough time to regret?
Unlike any other trading platform today, Forex Trading First offers you the possibility to Freeze the Buy or the Sell rate that you see for a few seconds, irrespective of rate movements. That means that the rate you see and freeze is the rate you get (if indeed you decide to make the deal). During those "FREEZE" seconds, the Forex market could change, however - you are guaranteed to use the rate you have frozen, in case you wish to materialize it into a deal. Please note that guaranteeing the rate per such feature is available during regular market activity only. Under unusual conditions, this feature will not be guaranteed.
Do I have enough time to regret?
Unlike any other trading platform today, Forex Trading First offers you the possibility to Freeze the Buy or the Sell rate that you see for a few seconds, irrespective of rate movements. That means that the rate you see and freeze is the rate you get (if indeed you decide to make the deal). During those "FREEZE" seconds, the Forex market could change, however - you are guaranteed to use the rate you have frozen, in case you wish to materialize it into a deal. Please note that guaranteeing the rate per such feature is available during regular market activity only. Under unusual conditions, this feature will not be guaranteed.
Interview with the FXDrive Winner
Li Zhi from China won 1st place in our October FXDrive contest
You can find Li Zhi's interview below. In it, she shares some of her money management tactics. It's evident from speaking with Li Zhi that she has a very cool, calm demeanor and an unfaltering devotion to her trading strategy. It was these factors that helped her conquer the forex market. Traders are encouraged to read her interview and put her tactics into practice!
When you're done reading her interview, check out her trading report to see firsthand how an investment of $1,000 turned into $17,568.30 in just a week
From her pose alone, we can see that Li Zhi has a powerful disposition.
Forex Club: Where are you from?
Li Zhi: Dalian City, Liaoning Province, China
FC: What do you do for a living?
LZ: I work in a catering business.
FC: Do you have any hobbies?
LZ: Money management.
FC: How did you hear about Forex Club?
LZ: I found Forex Club's website by searching on the internet.
FC: What were the main factors that contributed to your success?
LZ: Keeping a cool head, keeping all my emotions in check and sticking to my trading strategy. I had complete control over my emotions and because of this I was able to seize opportunities as they arose.
FC: What did you think about the ExpressFX trading platform?
LZ: Its zero spread trading had a big influence on me. I liked it a lot. The software had powerful functionality and was very stable. If the platform could place an order faster, it would be perfect.
FC: Do you plan on participating in the following rounds of the FXDrive contest?
LZ: I do plan on entering again. I hope I can show good results again.
FC: And finally, what the other traders have been waiting for; could you give us any words of advice?
LZ: There are many ways to be successful on the forex market. From my experience I found that you must determine your mindset before you start trading. Traders must keep everything simple. Limit the number of currency pairs to trade. For the contest, I only focused on one pair. Also make sure you choose a proper price level to enter the trade and most importantly, stick to your trading plan no matter what.
Commodities rise ahead of the FOMC Rate Decision…
Today, the precious metals rose ahead of the FOMC Rate Decision as the Fed is expected to keep interest rates low for an extended period, which accordingly corroded the appeal of the green Benjamin; the commodities opponent, beside the fact that a survey showed that the euro zone's present service sector enhanced for a second consecutive month.
Consequently, the low-yielding dollar lost momentum in front of the majors throughout the currencies markets, having in fact the dollar index plummeting, an index that tracks the strength of the dollar in front of a basket of currencies and that is so far trading at 76.01 recording a high of 76.39 and a low of 75.99.
As a result, the yellow precious metal prices are climbing to the upside on a weakened dollar trading at $1089.86 an ounce recording a high $1095.35 an ounce and a low of $1079.90 an ounce, not forgetting that the metal jumped to a record high of $1068.55 an ounce yesterday as the International Monetary Fund sold 200 metric tons of the metal to India's central bank, boosting accordingly the gold's appeal throughout overall markets and speculating the fact that more purchase could occur in this coming period.
Plus, the commodity indices rose today; where on one hand the S&P GSCI added 4.41 points to 514.66 and on the other hand RJ/CRB Commodity edged up 1.51 points to 278.00.
Moreover, silver prices are inclining as well on a daily chart to trade so far around $17.42 recording a high of $17.54 and a low of $17.07, whereas the platinum prices are rising slightly to the upside to trade at $1361.50 recording a high of $1368.00 and a low of $1354.00.
Consequently, the low-yielding dollar lost momentum in front of the majors throughout the currencies markets, having in fact the dollar index plummeting, an index that tracks the strength of the dollar in front of a basket of currencies and that is so far trading at 76.01 recording a high of 76.39 and a low of 75.99.
As a result, the yellow precious metal prices are climbing to the upside on a weakened dollar trading at $1089.86 an ounce recording a high $1095.35 an ounce and a low of $1079.90 an ounce, not forgetting that the metal jumped to a record high of $1068.55 an ounce yesterday as the International Monetary Fund sold 200 metric tons of the metal to India's central bank, boosting accordingly the gold's appeal throughout overall markets and speculating the fact that more purchase could occur in this coming period.
Plus, the commodity indices rose today; where on one hand the S&P GSCI added 4.41 points to 514.66 and on the other hand RJ/CRB Commodity edged up 1.51 points to 278.00.
Moreover, silver prices are inclining as well on a daily chart to trade so far around $17.42 recording a high of $17.54 and a low of $17.07, whereas the platinum prices are rising slightly to the upside to trade at $1361.50 recording a high of $1368.00 and a low of $1354.00.
Feds decides economic stimulation important
The Fed has decided yesterday that in spite of the recent improvement of the economic conditions and the better than expected growth rate of the third quarter, the economy is still in need of all of its easing stimulating policy steps further for storing confidence and improving the labor market conditions which can suffer further next year expecting the unemployment rate to get over 10%. The Fed's worries about the employment and this halting recovery were widely expected and there was no a major change in the market as expected.
The ECB has done the same repeating its mantra that the inflation is firmly anchored over the medium term and the demand is still sluggish and in need of the ECB current easing monetary policy for further.
The BOE has kept the interest rate unchanged too and as we have been waiting it has added 25bln Stg more to its current 175bln Stg governmental buying bonds plan which was good for keeping the assets value in UK to be 200 Bln Stg and left its 3 months period revision to the economic development and the central bank evaluation mentioning that the need and the importance of this step surely for stimulating the sluggish economy which faced a contraction in the third quarter of this year too but it looks that there was a higher discounting in the market of increasing this plan by more than this, So the British pound has got direct strong push across the broad after the decision.
The British pound was already well-supported today by stronger than expected releases of UK industrial productions of September coming up by 1.6% m/m from -2.5% in August while the market was waiting for just 1% and manufacturing productions of that same month have come at 1.7% monthly while the market was waiting for 1% monthly after declining by 1.9% in August but the cable is expected to face a strong resistance to be above 1.66 at the current risk appetite aversion in the stocks markets waiting for tomorrow US labor report of October release, by god's will which is expected to show losing of further 175k out of the farming sector. The market cares very much of the labor market conditions as it is widely read that there is no waited action from the Fed concerning its stimulation easing steps before a materilized improving of the labor market conditions and this could be obviously concluded again from the Fed's Assessment yesterday.
The ECB has done the same repeating its mantra that the inflation is firmly anchored over the medium term and the demand is still sluggish and in need of the ECB current easing monetary policy for further.
The BOE has kept the interest rate unchanged too and as we have been waiting it has added 25bln Stg more to its current 175bln Stg governmental buying bonds plan which was good for keeping the assets value in UK to be 200 Bln Stg and left its 3 months period revision to the economic development and the central bank evaluation mentioning that the need and the importance of this step surely for stimulating the sluggish economy which faced a contraction in the third quarter of this year too but it looks that there was a higher discounting in the market of increasing this plan by more than this, So the British pound has got direct strong push across the broad after the decision.
The British pound was already well-supported today by stronger than expected releases of UK industrial productions of September coming up by 1.6% m/m from -2.5% in August while the market was waiting for just 1% and manufacturing productions of that same month have come at 1.7% monthly while the market was waiting for 1% monthly after declining by 1.9% in August but the cable is expected to face a strong resistance to be above 1.66 at the current risk appetite aversion in the stocks markets waiting for tomorrow US labor report of October release, by god's will which is expected to show losing of further 175k out of the farming sector. The market cares very much of the labor market conditions as it is widely read that there is no waited action from the Fed concerning its stimulation easing steps before a materilized improving of the labor market conditions and this could be obviously concluded again from the Fed's Assessment yesterday.
Why should I learn forex trading
you must already be aware that Forex trading is a very lucrative way to make money from home or from work. Moreover, I'm sure you know someone, or have heard of someone who's already making good money in FX trading.Why not you ?
What you might not know though, is that 7 out of 10 traders keep on losing money in Forex! That's right, 70% of individual FX traders keep losing their hard-earned money in the market; while the other 30% work freely at home and make a solid living out of Forex.
So what is the major difference between the losing 70% and the winning 30%?
Forex trading knowledge and a sound trading system! If you want to have financial freedom by trading Forex and confidence in your trades; you need to get educated in Forex before you start trading it. Those who trade the Forex market with some knowledge and practice are taking advantage of one of the most lucrative markets anywhere in the world.
This site gives you all the resources and education materials you need to become a successful Forex trader
What you might not know though, is that 7 out of 10 traders keep on losing money in Forex! That's right, 70% of individual FX traders keep losing their hard-earned money in the market; while the other 30% work freely at home and make a solid living out of Forex.
So what is the major difference between the losing 70% and the winning 30%?
Forex trading knowledge and a sound trading system! If you want to have financial freedom by trading Forex and confidence in your trades; you need to get educated in Forex before you start trading it. Those who trade the Forex market with some knowledge and practice are taking advantage of one of the most lucrative markets anywhere in the world.
This site gives you all the resources and education materials you need to become a successful Forex trader
US Dollar Reaches Record Lows Affects Trade
The US dollar plunged to a record low against the Euro in April. This happened immediately after the economic growth figures for the U.S. were released by the U.S. Commerce Department reporting the weakest results in four years. The release of these figures has people worried that the United States is in danger of falling behind the rest of the world economically, especially with the USD losing over 3.1% to the Euro already this year. The USD low was partnered with a Euro high, reaching past its previous high in December of 2004, above $1.3680, for the first time ever.
Euro and USD extremes are going to have significant affects on trade within both Europe and the United States. Some groups are happy and are benefiting from the weakness of the dollar and the strength of the Euro, whereas others are losing large amounts of both money and business. A number of American exporters have gained significant amounts as a result of the weakness of the dollar; however one major U.S. business has suffered greatly due to these exchange rates. Walmart, who produces over 70% of their goods in China, is suffering due to the weakness of the dollar. The company has tried to find less pricey areas for production; however there is only so much they can do to battle the plummeting dollar.
Euro strength and dollar weakness are also affecting many European companies. The economy of the Eurozone is one that is export dependant. Under normal circumstances, export driven economies benefit from a weaker currency and typically hurt when the currency is too strong. With the rise of the Euro, European exporters and manufactures have much higher costs, which lead them to lose money unless they raise their prices, which most companies are reluctant to do.
It is not just European and American companies that are suffering from the prices of the USD and Euro. Any country that trades with either the United States or an EU nation is at risk for exchange rate fluctuations affecting their imports and/or exports.
Although, there is no way to completely eliminate foreign exchange rate risk and it will always be an issue for exporters and importers, there are ways to make yourself or your company less vulnerable. Hedging foreign exchange rate risks is not a new idea, but many companies are just recently learning the importance of hedging against these risks. As more companies take advantage of this financial technique, exchange rate losses lessen, and the price of a currency at any point in time has less of a chance of making or breaking a company. Individual investors can also hedge their foreign exchange rate risk through currency trading.
Euro and USD extremes are going to have significant affects on trade within both Europe and the United States. Some groups are happy and are benefiting from the weakness of the dollar and the strength of the Euro, whereas others are losing large amounts of both money and business. A number of American exporters have gained significant amounts as a result of the weakness of the dollar; however one major U.S. business has suffered greatly due to these exchange rates. Walmart, who produces over 70% of their goods in China, is suffering due to the weakness of the dollar. The company has tried to find less pricey areas for production; however there is only so much they can do to battle the plummeting dollar.
Euro strength and dollar weakness are also affecting many European companies. The economy of the Eurozone is one that is export dependant. Under normal circumstances, export driven economies benefit from a weaker currency and typically hurt when the currency is too strong. With the rise of the Euro, European exporters and manufactures have much higher costs, which lead them to lose money unless they raise their prices, which most companies are reluctant to do.
It is not just European and American companies that are suffering from the prices of the USD and Euro. Any country that trades with either the United States or an EU nation is at risk for exchange rate fluctuations affecting their imports and/or exports.
Although, there is no way to completely eliminate foreign exchange rate risk and it will always be an issue for exporters and importers, there are ways to make yourself or your company less vulnerable. Hedging foreign exchange rate risks is not a new idea, but many companies are just recently learning the importance of hedging against these risks. As more companies take advantage of this financial technique, exchange rate losses lessen, and the price of a currency at any point in time has less of a chance of making or breaking a company. Individual investors can also hedge their foreign exchange rate risk through currency trading.
The Foreign Exchange Market for Beginners
The foreign exchange market or forex market as it is often called is the market in which currencies are traded. Currency Trading is the world's largest market consisting of almost $2 trillion in daily volume and as investors learn more and become more interested, the market continues to rapidly grow. Not only is the forex market the largest market in the world, but it is also the most liquid, differentiating it from the other markets. In addition, there is no central marketplace for the exchange of currency, but instead the trading is conducted over-the-counter. Unlike the stock market, this decentralization of the market allows traders to choose from a number of different dealers to make trades with and allows for comparison of prices. Typically, the larger a dealer is the better access they have to pricing at the largest banks in the world, and are able to pass that on to their clients. The spot currency market is open twenty-four hours a day, five days a week, with currencies being traded around the world in all of the major financial centers.
All trades that take place in the foreign exchange market involve the buying of one currency and the selling of another currency simultaneously. This is because the value of one currency is determined by its comparison to another currency. The first currency of a currency pair is called the "base currency," while the second currency is called the “counter currency.” The currency pair shows how much of the counter currency is needed to purchase one unit of the base currency. Currency pairs can be thought of as a single unit that can be bought or sold. When purchasing a currency pair, the base currency is being bought, while the counter currency is being sold. The opposite is true, when the sale of a currency pair takes place. There are four major currency pairs that are traded most often in the foreign exchange market. These include the EUR/USD, USD/JPY, GBP/USD, and USD/CHF.
Forex Capital Markets (FXCM) is an online currency trading firm that offers a free demo account to traders who are new and interested in the foreign exchange market. Registering for a demo account allows a new trader to download the online trading platform that is used by the company's clients trading live accounts and make trades as if they were doing it with real money. The demo account is an excellent way to experiment with the foreign exchange market while learning your way around the trading platform. It allows you to experience every step of currency trading including choosing currency pairs, deciding how much risk to take, tracking the time and dates of placed trades, deciding how long to stay in the trade, and when to exit the trade. It also allows the placing of stop and limit orders on trades.
Information about trading and specifically about how to use the online trading platform can be found on the FXCM webpage. In addition, FXCM offers FREE interactive online seminars that are extremely useful to both new and experienced currency traders. These "educational webinars," as they are called are run by experienced financial strategists and range in topics from trading specific news events to trading the Euro. In addition to the webinars, FXCM also offers numerous online courses that teach investors how to trade the currency market.
All trades that take place in the foreign exchange market involve the buying of one currency and the selling of another currency simultaneously. This is because the value of one currency is determined by its comparison to another currency. The first currency of a currency pair is called the "base currency," while the second currency is called the “counter currency.” The currency pair shows how much of the counter currency is needed to purchase one unit of the base currency. Currency pairs can be thought of as a single unit that can be bought or sold. When purchasing a currency pair, the base currency is being bought, while the counter currency is being sold. The opposite is true, when the sale of a currency pair takes place. There are four major currency pairs that are traded most often in the foreign exchange market. These include the EUR/USD, USD/JPY, GBP/USD, and USD/CHF.
Forex Capital Markets (FXCM) is an online currency trading firm that offers a free demo account to traders who are new and interested in the foreign exchange market. Registering for a demo account allows a new trader to download the online trading platform that is used by the company's clients trading live accounts and make trades as if they were doing it with real money. The demo account is an excellent way to experiment with the foreign exchange market while learning your way around the trading platform. It allows you to experience every step of currency trading including choosing currency pairs, deciding how much risk to take, tracking the time and dates of placed trades, deciding how long to stay in the trade, and when to exit the trade. It also allows the placing of stop and limit orders on trades.
Information about trading and specifically about how to use the online trading platform can be found on the FXCM webpage. In addition, FXCM offers FREE interactive online seminars that are extremely useful to both new and experienced currency traders. These "educational webinars," as they are called are run by experienced financial strategists and range in topics from trading specific news events to trading the Euro. In addition to the webinars, FXCM also offers numerous online courses that teach investors how to trade the currency market.
Thursday, November 5, 2009
Forex History - The Evolution OF FX Markets
The Gold Exchange and the Bretton Woods Agreement
In 1967, a Chicago bank refused a college professor by the name of Milton Friedman a loan in pound sterling because he had intended to use the funds to short the British currency. Friedman, who had perceived sterling to be priced too high against the dollar, wanted to sell the currency, then later buy it back to repay the bank after the currency declined, thus pocketing a quick profit. The bank’s refusal to grant the loan was due to the Bretton Woods Agreement, established twenty years earlier, which fixed national currencies against the dollar, and set the dollar at a rate of $35 per ounce of gold.
The Bretton Woods Agreement, set up in 1944, aimed at installing international monetary stability by preventing money from fleeing across nations, and restricting speculation in the world currencies. Prior to the Agreement, the gold exchange standard--prevailing between 1876 and World War I--dominated the international economic system. Under the gold exchange, currencies gained a new phase of stability as they were backed by the price of gold. It abolished the age-old practice used by kings and rulers of arbitrarily debasing money and triggering inflation.
But the gold exchange standard didn’t lack faults. As an economy strengthened, it would import heavily from abroad until it ran down its gold reserves required to back its money; consequently, the money supply would shrink, interest rates rose and economic activity slowed to the extent of recession. Ultimately, prices of goods had hit bottom, appearing attractive to other nations, who would rush into buying sprees that injected the economy with gold until it increased its money supply, and drive down interest rates and recreate wealth into the economy. Such boom-bust patterns prevailed throughout the gold standard until the outbreak of World War I interrupted trade flows and the free movement of gold.
After the Wars, the Bretton Woods Agreement was founded, where participating countries agreed to try and maintain the value of their currency with a narrow margin against the dollar and a corresponding rate of gold as needed. Countries were prohibited from devaluing their currencies to their trade advantage and were only allowed to do so for devaluations of less than 10%. Into the 1950s, the ever-expanding volume of international trade led to massive movements of capital generated by post-war construction. That destabilized foreign exchange rates as setup in Bretton Woods.
The Agreement was finally abandoned in 1971, and the US dollar would no longer be convertible into gold. By 1973, currencies of major industrialized nations floated more freely, as they were controlled mainly by the forces of supply and demand. Prices were floated daily, with volumes, speed and price volatility all increasing throughout the 1970s, giving rise to new financial instruments, market deregulation and trade liberalization.
In the 1980s, cross-border capital movements accelerated with the advent of computers and technology, extending market continuum through Asian, European and American time zones. Transactions in foreign exchange rocketed from about $70 billion a day in the 1980s, to more than $1.5 trillion a day two decades later.
In 1967, a Chicago bank refused a college professor by the name of Milton Friedman a loan in pound sterling because he had intended to use the funds to short the British currency. Friedman, who had perceived sterling to be priced too high against the dollar, wanted to sell the currency, then later buy it back to repay the bank after the currency declined, thus pocketing a quick profit. The bank’s refusal to grant the loan was due to the Bretton Woods Agreement, established twenty years earlier, which fixed national currencies against the dollar, and set the dollar at a rate of $35 per ounce of gold.
The Bretton Woods Agreement, set up in 1944, aimed at installing international monetary stability by preventing money from fleeing across nations, and restricting speculation in the world currencies. Prior to the Agreement, the gold exchange standard--prevailing between 1876 and World War I--dominated the international economic system. Under the gold exchange, currencies gained a new phase of stability as they were backed by the price of gold. It abolished the age-old practice used by kings and rulers of arbitrarily debasing money and triggering inflation.
But the gold exchange standard didn’t lack faults. As an economy strengthened, it would import heavily from abroad until it ran down its gold reserves required to back its money; consequently, the money supply would shrink, interest rates rose and economic activity slowed to the extent of recession. Ultimately, prices of goods had hit bottom, appearing attractive to other nations, who would rush into buying sprees that injected the economy with gold until it increased its money supply, and drive down interest rates and recreate wealth into the economy. Such boom-bust patterns prevailed throughout the gold standard until the outbreak of World War I interrupted trade flows and the free movement of gold.
After the Wars, the Bretton Woods Agreement was founded, where participating countries agreed to try and maintain the value of their currency with a narrow margin against the dollar and a corresponding rate of gold as needed. Countries were prohibited from devaluing their currencies to their trade advantage and were only allowed to do so for devaluations of less than 10%. Into the 1950s, the ever-expanding volume of international trade led to massive movements of capital generated by post-war construction. That destabilized foreign exchange rates as setup in Bretton Woods.
The Agreement was finally abandoned in 1971, and the US dollar would no longer be convertible into gold. By 1973, currencies of major industrialized nations floated more freely, as they were controlled mainly by the forces of supply and demand. Prices were floated daily, with volumes, speed and price volatility all increasing throughout the 1970s, giving rise to new financial instruments, market deregulation and trade liberalization.
In the 1980s, cross-border capital movements accelerated with the advent of computers and technology, extending market continuum through Asian, European and American time zones. Transactions in foreign exchange rocketed from about $70 billion a day in the 1980s, to more than $1.5 trillion a day two decades later.
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