Forex Crunch Forex on the Rise |
| Posted: 03 Aug 2010 05:07 AM PDT
Forex trading continues to grow. Two separate reports show that the volume of forex trading is on the rise. This goes hand in hand with the evolution of the industry. According to the Bank of International Settlements, the daily volume of forex trading reached 4.1 trillion US dollars a day. This report is published only once every three years and is very important: This 28% growth rate since 2007 is partly due to the credit crisis. As the world stock markets collapsed in the fall of 2008, forex became more popular. In forex trading, there is always a currency that goes up, and people found it attractive, together with the higher volatility. Also fund managers find currency trading to be attractive, and they have diversified their investments in favor of forex in recent years. In his report about BIS release, Adam Kritzer analyzes the reasons and also comments about the implications:
Another report comes from the Foreign Exchange Committee, with a different resolution, and a focus on North America. In its Survey of North American Foreign Exchange Volume, the committee shows that the volume rose by 11.8% in April compared to October 2009, and is almost back to the peak levels seen at the height of the crisis in October 2008. In his analysis of this report, Michael Greenberg brings more figures. After reaching the aforementioned peak in October 2008, volume fell in April 2009, but resumed a steady uptrend afterwards. The growth of forex trading goes together with more tools available for traders – better software, forex social sites and also tighter regulation, such as the recent leverage limit in Japan, and the proposed leverage limit in the US by the CFTC. All in all, forex trading is marching towards the mainstream. For further reading, here’s a series of 5 articles about the road that forex trading needs to take towards the mainstream. Here’s the most recent article, about finding the best forex trader. The other articles are linked from there. |
| Forex Daily Outlook – August 3 2010 Posted: 02 Aug 2010 02:00 PM PDT
U.S. Pending Home Sales, Core PCE and Factory Orders are the major events on our menu. Here is an outlook on today’s market moving events. In the US, Pending Home Sales measuring the change in the number of homes under contract to be sold but still awaiting the closing transaction, excluding new construction predicted a small rise following the 30% unexpected dip in the previous month. A gradual recovery is expected.
More in the US, core PCE Index differing from Core CPI in by measures goods and services targeted towards and consumed by individuals forecasted to show 0.1% rise following previous month's reading of 0.2%, while Personal spending in July registers a smaller increase by 0.1% m/m, compared with 0.2% m/m in June. Finally in the US, Factory Orders a leading indicator of production expected a slight drop of 0.2% following 1.4% dip in May. For more on USD/CAD, read the Canadian dollar forecast. In Great Britain, Halifax House Price Index a leading indicator of the housing industry’s health predicted 0.4% drop following the unexpected 0.6% dip in June. More in Great Britain, Construction PM, based on a survey of about 170 purchasing managers which asks respondents to rate the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories, expected to reach 58. 2 points 0.2 points weaker than in the previous month but still above the 50 point line. Read more about the Pound in the GBP/USD forecast. In Switzerland, Consumer Price Index, predicted to continue decreasing by 0.5% following 0.4% drop in June. In Australia, Reserve Bank of Australia Interest Rate Announcement, following the unexpectedly lower inflationary pressures in Australia in Q2 2010, coupled with signs of a global economic slowdown, would be the likely factors that could influence the Reserve Bank of Australia policy makers' decision to keep interest rates unchanged for another month therefore the cash rate is predicted to remain 4.50%. More in Australia, Building Approvals expected to rise by 2.1% following the 6.6% drop in May and 14.8 dip in April. Retail Sales are also foreseen to rise by 0.4% following a 0.2% rise in the previous month. Finally in Australia, ANZ Job Advertisements measuring change in the number of jobs advertised in the major daily newspapers and websites covering the capital cities expected to remain 2.7% as in July. Commodity Prices are likely to reach 43% as in July and AIG Services Index based on a survey of about 200 service-based companies expected to remain close to the 50 point line from 48.8 in the previous month. That’s it for today. Happy forex trading! Want to see what other traders are doing in real accounts? Check out Currensee. It's free. |
| Will Bernanke Devaluate the Dollar Again? Posted: 02 Aug 2010 10:16 AM PDT
As the US economy shows signs of slowdown, the Federal Reserve might intervene to boost the economy by buying assets – spilling dollars. This prediction, by the Japanese Nomura bank goes hand in hand with a very sharp drop in the dollar across the board. Is the dollar going for an accelerated collapse like in March 2009? We’ve seen a sharp risk rally today – EUR/USD, GBP/USD, AUD/USD, NZD/USD rallied, USD/CAD dropped, while the “safe haven” currencies – the Swissy and the yen, didn’t move much against the dollar. This collapse of dollar continues the trend that we’ve seen in recent weeks, yet the scale was stronger. Here’s why: The Federal Reserve meets on August 10th for the rate decision. The recent economic data shows that the economy is slowing down – no double dip recession, at least not yet, but certainly a slowdown. Paul Sheard, global chief economist at at the Japanese Bank Nomura, suggests that the central bank won’t wait for a double-dip recession to be confirmed, but will act in the form of renewing quantitative easing steps by buying assets once again. The meaning of buying assets, or enlarging the Fed’s balance sheet is printing dollars. And the meaning of printing dollars is devaluing the dollar. Reminder of March 2009 On March 18th 2009, the FOMC decided on buying assets in a total value of 1.25 trillion dollars. This announcement of this inconceivable sum sent EUR/USD to a 600 pip leap and began a long term move that lasted for about 9 months, peaking at 1.5144 in December 2009. Stock markets bottomed out and after the crisis and began rising. The price of oil bottomed out and began rising as well. The US dollar lost ground across the board. A small reminder in the shape of a knee jerk reaction was seen now. Dollar collapses with the article In an article published on CNBC at 7:17 GMT (3:17 Eastern Time), Sheard is quoted:
I’m mentioning the publication timing of the article due to the market reaction at that time. A few currencies began a move at this timing – USD/CAD fell below the support line of 1.0280, GBP/USD moved above Friday’s 1.5720 peak (highest in 5 months), and AUD/USD jumped to a three month high, 0.9118, before continuing higher. All the moves happened just after the article was released. Euro, Stocks and oil celebrate EUR/USD began moving only during the New York session, but it also made an impressive move, above the tough 1.3114 and reached out for 1.32. This accelerated the move in the US dollar index, that made a big plunge from 81.55 to 80.90 at the time of writing. US stock market indices are also rising strongly and so is oil. Crude oil leaped above $80, reaching almost $82 – the highest level in three months. This boosts loonie bulls. If the Federal Reserve indeed announces new quantitative easing programs / dollar printing, I don’t think the effect will be as strong and as sustainable as in March 2009, as it won’t be a huge surprise like last time. Nevertheless, the US dollar will significantly weaken on such a scenario. Want to see what other traders are doing in real accounts? Check out Currensee. It's free.. |
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