How are foreign currenciesquoted and priced
Now let’s take a look at how foreign currencies are quoted and priced. Currencies are designated by three-letter symbols. The standard symbols for some of the most commonly traded currencies are shown below.
EUR
Euro
USD
United States dollar
CAD
Canadian dollar
GBP
British pound
JPY
Japanese yen
AUD
Australian dollar
CHF
Swiss franc
Currency pairs are often quoted as bid-ask spreads. The first part of the quote is the amount of the quote currency you will receive in exchange for one unit of the base currency (the bid price). The second part of the quote is the amount of the quote currency you must spend for one unit of the base currency (the ask or offer price). For example, a EUR/USD spread of 1.2170/1.2178 means that you can sell one Euro for $1.2170 and buy one Euro for $1.2178. This spread could also be quoted as 1.2170/78.
At first glance, the bid and ask prices may seem backwards to you. That is because they are listed from the dealer’s point of view, not from your point of view. The first part of the spread, or the bid, is what the dealer is willing to pay to buy the base currency. So this is the price you will get if you SELL the base currency. In the same way, the second part of the spread, or the ask, is what the dealer is willing to sell the base currency at, so this is the price you will get if you BUY the base currency.
Friday, November 2, 2007
What are foreign currency exchange rates?
What are foreign currency exchange rates?
Let’s start with a definition of foreign currency exchange rates. Simply put, foreign currency exchange rates are what it costs to exchange one country’s currency for another country’s currency. For example, if you go to England on vacation, you will have to pay for your hotel, meals, admissions fees, souvenirs and other expenses in British pounds. Since your money is all in US dollars, you will have to sell some of your dollars to buy British pounds.
Let’s assume that you have decided to take a trip to England. Before you leave, you go to your bank and buy $1,000 worth of British pounds. If you get 565.83 British pounds (£565.83) for your $1,000, each dollar is worth .56583 British pounds. This is the exchange rate for converting dollars to pounds.
After spending a few days in England, you realize that £565.83 won’t be enough to cover all of your expenses. So you go to a bank in England and buy another $1,000 worth of British pounds. This time, however, you get only £557.02 for your $1,000. The exchange rate for converting dollars to pounds has dropped from .56583 to .55702. This means that US dollars are worth less compared to the British pound than they were before you left on vacation.
When you arrive home, you still have some British pounds left. So you go to your bank and use your remaining £100 to buy US dollars. If the bank gives you $179.31, each British pound is worth 1.7931 dollars. This is the exchange rate for converting pounds to dollars.
Let’s start with a definition of foreign currency exchange rates. Simply put, foreign currency exchange rates are what it costs to exchange one country’s currency for another country’s currency. For example, if you go to England on vacation, you will have to pay for your hotel, meals, admissions fees, souvenirs and other expenses in British pounds. Since your money is all in US dollars, you will have to sell some of your dollars to buy British pounds.
Let’s assume that you have decided to take a trip to England. Before you leave, you go to your bank and buy $1,000 worth of British pounds. If you get 565.83 British pounds (£565.83) for your $1,000, each dollar is worth .56583 British pounds. This is the exchange rate for converting dollars to pounds.
After spending a few days in England, you realize that £565.83 won’t be enough to cover all of your expenses. So you go to a bank in England and buy another $1,000 worth of British pounds. This time, however, you get only £557.02 for your $1,000. The exchange rate for converting dollars to pounds has dropped from .56583 to .55702. This means that US dollars are worth less compared to the British pound than they were before you left on vacation.
When you arrive home, you still have some British pounds left. So you go to your bank and use your remaining £100 to buy US dollars. If the bank gives you $179.31, each British pound is worth 1.7931 dollars. This is the exchange rate for converting pounds to dollars.
Forex online training
Introduction
Welcome to National Futures Association’s e-learning program for retail off-exchange foreign currency trading. As the industrywide self-regulatory organization for the U.S. futures industry, NFA is committed to providing innovative programs and services that protect investors and ensure market integrity. We’ve always believed that one of the best ways to protect investors is to provide them with the materials they need to make informed trading decisions.
The off-exchange foreign currency, or forex, market is a large, growing and liquid financial market that operates 24 hours a day. It has no central trading location or exchange with many buyers and sellers. Most of the trading is conducted by telephone or through electronic trading networks. Banks, insurance companies, large corporations and other large financial institutions all use the forex markets to manage the risks associated with fluctuations in currency rates. In recent years, however, a number of firms have begun offering forex contracts to individual investors. NFA regulates some, but not all, of these forex firms. Before you open an account with a forex firm, you should ask the firm if NFA regulates its forex activities. If the answer is no, find out who does regulate them.
Like many other investments, forex trading carries a high level of risk and may not be suitable for all investors. Forex trading requires constant monitoring and an understanding of the relationship between currencies, as well as what factors influence the currencies' value. If you are a retail investor considering trading in this market, you need to understand fully the market and some of its unique features.
One final note before we begin. This program does not suggest that you should or should not trade in the retail off-exchange foreign currency market. You should make that decision after consulting with your financial advisor and considering your own financial situation and objectives.
This program should serve as just one element of your due diligence.
We have divided this program into six modules:
The fundamentals of foreign currency exchange rates;
How foreign currencies are quoted and priced;
How much it costs to trade foreign currencies;
How to calculate profits and losses;
How leverage works; and
The risks of forex trading.
You can view any module at any time by clicking on the module number in the right-hand column. We estimate that it will take you approximately 45 minutes to complete the program.
Welcome to National Futures Association’s e-learning program for retail off-exchange foreign currency trading. As the industrywide self-regulatory organization for the U.S. futures industry, NFA is committed to providing innovative programs and services that protect investors and ensure market integrity. We’ve always believed that one of the best ways to protect investors is to provide them with the materials they need to make informed trading decisions.
The off-exchange foreign currency, or forex, market is a large, growing and liquid financial market that operates 24 hours a day. It has no central trading location or exchange with many buyers and sellers. Most of the trading is conducted by telephone or through electronic trading networks. Banks, insurance companies, large corporations and other large financial institutions all use the forex markets to manage the risks associated with fluctuations in currency rates. In recent years, however, a number of firms have begun offering forex contracts to individual investors. NFA regulates some, but not all, of these forex firms. Before you open an account with a forex firm, you should ask the firm if NFA regulates its forex activities. If the answer is no, find out who does regulate them.
Like many other investments, forex trading carries a high level of risk and may not be suitable for all investors. Forex trading requires constant monitoring and an understanding of the relationship between currencies, as well as what factors influence the currencies' value. If you are a retail investor considering trading in this market, you need to understand fully the market and some of its unique features.
One final note before we begin. This program does not suggest that you should or should not trade in the retail off-exchange foreign currency market. You should make that decision after consulting with your financial advisor and considering your own financial situation and objectives.
This program should serve as just one element of your due diligence.
We have divided this program into six modules:
The fundamentals of foreign currency exchange rates;
How foreign currencies are quoted and priced;
How much it costs to trade foreign currencies;
How to calculate profits and losses;
How leverage works; and
- The fundamentals of foreign currency exchange rates;
- How foreign currencies are quoted and priced;
- How much it costs to trade foreign currencies;
- How to calculate profits and losses;
- How leverage works; and
- The risks of forex trading.
You can view any module at any time by clicking on the module number in the right-hand column. We estimate that it will take you approximately 45 minutes to complete the program.
The risks of forex trading.
You can view any module at any time by clicking on the module number in the right-hand column. We estimate that it will take you approximately 45 minutes to complete the program.
ADVANTAGES OF NO DEALING DESK
ADVANTAGES OF NO DEALING DESK TRADING THROUGH FXCM
TRADE FOREX ON RATES FROM THE LARGEST BANKS IN THE WORLD
With No Dealing Desk execution, traders—through the FXCM Trading Station—have the ability to trade on rates provided by some of the largest banks in the world. These banks provide FXCM with some of the best rates, which results in spreads as low as 2 pips. No Dealing Desk execution combines the benefits of trading prices from top-tier banks, with the convenience and speed of FXCM's award-winning trading platform.
TRADE FOREX WHEN YOU WANT AND HOW YOU WANT...NO RESTRICTIONS
You trade when you want—even during market-moving news and economic events. Furthermore, this system enables you to place entry orders at any price—even inside the spread.
24-HOUR SUPPORT
FXCM offers 24-hour-a-day trading support, giving you the ability to place orders over the phone when the market is open. Our staff of 500+ highly trained specialists are available around the clock to service clients from our regional headquarters in New York, London, Hong Kong, and Tokyo.
SIZE & FINANCIAL STRENGTH
As the forex market is an over-the-counter market with no centralized exchange, not everyone receives access to the same prices or quality of execution. The world's largest banks tend to provide better prices and execution to institutions with the largest trade volume and the most solid financials. FXCM averages $200,000,000,000 ($200 billion) in monthly notional trading volume and is one of the most well-capitalized Forex Dealer Members. According to the financial data posted on the CFTC website, as one of the oldest and largest high-volume retail online forex brokers, FXCM has built strong execution relationships with many of the world's largest international banks. FXCM receives and is able to pass on the benefits of size, better prices, and better execution to our clients.
TRADE FOREX ON RATES FROM THE LARGEST BANKS IN THE WORLD
With No Dealing Desk execution, traders—through the FXCM Trading Station—have the ability to trade on rates provided by some of the largest banks in the world. These banks provide FXCM with some of the best rates, which results in spreads as low as 2 pips. No Dealing Desk execution combines the benefits of trading prices from top-tier banks, with the convenience and speed of FXCM's award-winning trading platform.
TRADE FOREX WHEN YOU WANT AND HOW YOU WANT...NO RESTRICTIONS
You trade when you want—even during market-moving news and economic events. Furthermore, this system enables you to place entry orders at any price—even inside the spread.
24-HOUR SUPPORT
FXCM offers 24-hour-a-day trading support, giving you the ability to place orders over the phone when the market is open. Our staff of 500+ highly trained specialists are available around the clock to service clients from our regional headquarters in New York, London, Hong Kong, and Tokyo.
SIZE & FINANCIAL STRENGTH
As the forex market is an over-the-counter market with no centralized exchange, not everyone receives access to the same prices or quality of execution. The world's largest banks tend to provide better prices and execution to institutions with the largest trade volume and the most solid financials. FXCM averages $200,000,000,000 ($200 billion) in monthly notional trading volume and is one of the most well-capitalized Forex Dealer Members. According to the financial data posted on the CFTC website, as one of the oldest and largest high-volume retail online forex brokers, FXCM has built strong execution relationships with many of the world's largest international banks. FXCM receives and is able to pass on the benefits of size, better prices, and better execution to our clients.
Thursday, November 1, 2007
Charts: USDCHF
USDCHF - a bellwether for the USD picture?
USDCHF looks like it is at an important pivot area and needs to decide in the upcoming sessions whether the bear market is still alive or whether we are headed for a sharp consolidation higher. The old low was in the 1.1620 area, and this was tested again on the Monday after the G-7 meeting, and then broken again in the last few days. The new lows haven't held well so far as we are trading back at the 1.1620 pivot area again this morning, so USDCHF needs to either pick up the downside again to prove the bearish case, or it is at risk of presenting a false break lower and therefore disappointing the bears with a sharp consolidation higher. Note the importance of the 55-day SMA previously (two areas circled), which is still very far off above 1.1800. The 2004 low is still a long ways off at 1.1290.
Forex Market Update
By John HardyMarket StrategistSaxo Bank
-->
Thursday, Nov 01, 2007, 09:25 GMT
By John Hardy Market Strategist Saxo Bank
USDJPY breaking resistance as Fed statement shifts focus back to incoming data. ISM and PCE inflation data on tap today.
Carry theme still in full swing right now on commodity price spikes and equity strength yesterday.
MAJOR HEADLINES – PREVIOUS SESSION
Overnight developments:
US Fed cut rates 25 bps to bring the Fed Funds rate to 4.50%. The vote was 9-1 for this decision, with the one dissenter voting for no change
Australia AiG Performance of Mfg Index for October out at 53.3 vs. 50.7 in September
Australia Retail Sales for Sep rose +0.8% MoM vs. +0.5% expected
Australia Trade Balance was -1.86B AUD in Sep vs. -1.0B expected
THEMES TO WATCH – UPCOMING SESSION
Key event risks today (all times GMT):
Norway Unemployment Rate (0900)
UK Manufacturing PMI (0930)
UK CBI Oct Distributive Trades Report (1100)
US Chhalenger Job Cuts (1130)
US Personal Income and Spending (1230)
US PCE Core (1230)
US ISM Manufacturing (1400)
Market Comments
Yesterday, we got our highest odds scenario from the FOMC: a 25 bps cut with a change to the statement that reasonably neutralized the forward trajectory of rates. US rates responded sharply to this, with the next EuroDollar STIR contracts on the strip dropping sharply and USD 2-year rates jumping higher on the news. The key differences in the statement were 1) the specific worries expressed about commodity driven inflation: "recent inrease in energy and ommodity prices, among other factors, may put renewed upward pressure on inflation." 2) an expression of the outlook/risks being in balance: "after this action, the upside risks to inflation roughly balance the downside risks to growth." This latter statement is the important addition that effectively gives the Fed maximum flexibility at its next rate setting meeting and future rate cuts are by no means certain. Importantly in the bigger picture - over the past few months, the US data has moved to the background as the obssessive focus was on the credit situation, liquidity problems, and big financial institutions. With this new policy statement, the focus shifts to the data - which is suddenly important again and could trigger at least short-term moves on each new release.
And speaking of incoming data - today we get the ISM manufacturing number and the PCE core and tomorrow the employment report.
We may have seen a key divergence yesterday in terms of the USD and its correlation with the risk aversion/appetite theme. In the recent paradigm, the USD tended to only thrive when risk aversion was high. With a strong batch of GDP data and a more hawkish Fed pushing rates higher, however, the interest rate differentials with the other majors have been reigned in further and make the last leg of USD weakening look unjustified. At the same time, yesterday showed that equity markets are still buoyant and the carry trade seems very much alive. This combined with the still very dovish BoJ and could mean long USDJPY positions would be an interesting way to test a continuation of this theme. USDJPY is breaking higher through the 55-day SMA at 115.50 at which it settled yesterday. USD/CHF could be a possible alternative, as the SNB's Roth's tough talk has failed to put a lid on EUR/CHF and USD/CHF seems to be having a hard time holding the recent lows below 1.1620 - though the technicals are less clear cut there. USD/CAD looks criminally mispriced, but catching a falling knife is always a dangerous occupation.
One interesting data point to notice in the swarm of things going on at present, was the EuroZone CPI estimate, with yesterday's October release suddenly jumping to a 5-year high at 2.6% after being mired below 2.0% for the better part of a year.
The guidance from Norges Bank was very dovish and the pair spiked very shaprly higher, before a 6-dollar (!!) spike in crude oil prices put a lid on the EURNOK situation later in the day. Norges Bank suggested they saw rates at 5.00% in 2010 - a 50 bps downward adjustment from its guidance in June and adjusted inflation forecasts down as well. As long as crude is at these levels, however, the pair is a tough one to buy - there may be room for a move to test the 7.8700 area here, nonetheless, if it stays above 7.7500.
Charts: USDCHF
USDCHF - a bellwether for the USD picture? USDCHF looks like it is at an important pivot area and needs to decide in the upcoming sessions whether the bear market is still alive or whether we are headed for a sharp consolidation higher. The old low was in the 1.1620 area, and this was tested again on the Monday after the G-7 meeting, and then broken again in the last few days. The new lows haven't held well so far as we are trading back at the 1.1620 pivot area again this morning, so USDCHF needs to either pick up the downside again to prove the bearish case, or it is at risk of presenting a false break lower and therefore disappointing the bears with a sharp consolidation higher. Note the importance of the 55-day SMA previously (two areas circled), which is still very far off above 1.1800. The 2004 low is still a long ways off at 1.1290.
Note: the support/resistance levels used in the matrix’s of this document are levels derived from yesterday high, low and close. Reference in the text to other support/resistance levels will occur.
Risk Warnings:
Saxo Bank A/S shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information herein contained. The contents of this publication should not be construed as an express or implied promise, guarantee or implication by Saxo Bank that clients will profit from the strategies herein or that losses in connection therewith can or will be limited. Trades in accordance with the recommendations in an analysis, especially leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits, in particular if the conditions mentioned in the analysis do not occur as anticipated.
USDCHF looks like it is at an important pivot area and needs to decide in the upcoming sessions whether the bear market is still alive or whether we are headed for a sharp consolidation higher. The old low was in the 1.1620 area, and this was tested again on the Monday after the G-7 meeting, and then broken again in the last few days. The new lows haven't held well so far as we are trading back at the 1.1620 pivot area again this morning, so USDCHF needs to either pick up the downside again to prove the bearish case, or it is at risk of presenting a false break lower and therefore disappointing the bears with a sharp consolidation higher. Note the importance of the 55-day SMA previously (two areas circled), which is still very far off above 1.1800. The 2004 low is still a long ways off at 1.1290.
Forex Market Update
By John HardyMarket StrategistSaxo Bank
-->
Thursday, Nov 01, 2007, 09:25 GMT
By John Hardy Market Strategist Saxo Bank
USDJPY breaking resistance as Fed statement shifts focus back to incoming data. ISM and PCE inflation data on tap today.
Carry theme still in full swing right now on commodity price spikes and equity strength yesterday.
MAJOR HEADLINES – PREVIOUS SESSION
Overnight developments:
US Fed cut rates 25 bps to bring the Fed Funds rate to 4.50%. The vote was 9-1 for this decision, with the one dissenter voting for no change
Australia AiG Performance of Mfg Index for October out at 53.3 vs. 50.7 in September
Australia Retail Sales for Sep rose +0.8% MoM vs. +0.5% expected
Australia Trade Balance was -1.86B AUD in Sep vs. -1.0B expected
THEMES TO WATCH – UPCOMING SESSION
Key event risks today (all times GMT):
Norway Unemployment Rate (0900)
UK Manufacturing PMI (0930)
UK CBI Oct Distributive Trades Report (1100)
US Chhalenger Job Cuts (1130)
US Personal Income and Spending (1230)
US PCE Core (1230)
US ISM Manufacturing (1400)
Market Comments
Yesterday, we got our highest odds scenario from the FOMC: a 25 bps cut with a change to the statement that reasonably neutralized the forward trajectory of rates. US rates responded sharply to this, with the next EuroDollar STIR contracts on the strip dropping sharply and USD 2-year rates jumping higher on the news. The key differences in the statement were 1) the specific worries expressed about commodity driven inflation: "recent inrease in energy and ommodity prices, among other factors, may put renewed upward pressure on inflation." 2) an expression of the outlook/risks being in balance: "after this action, the upside risks to inflation roughly balance the downside risks to growth." This latter statement is the important addition that effectively gives the Fed maximum flexibility at its next rate setting meeting and future rate cuts are by no means certain. Importantly in the bigger picture - over the past few months, the US data has moved to the background as the obssessive focus was on the credit situation, liquidity problems, and big financial institutions. With this new policy statement, the focus shifts to the data - which is suddenly important again and could trigger at least short-term moves on each new release.
And speaking of incoming data - today we get the ISM manufacturing number and the PCE core and tomorrow the employment report.
We may have seen a key divergence yesterday in terms of the USD and its correlation with the risk aversion/appetite theme. In the recent paradigm, the USD tended to only thrive when risk aversion was high. With a strong batch of GDP data and a more hawkish Fed pushing rates higher, however, the interest rate differentials with the other majors have been reigned in further and make the last leg of USD weakening look unjustified. At the same time, yesterday showed that equity markets are still buoyant and the carry trade seems very much alive. This combined with the still very dovish BoJ and could mean long USDJPY positions would be an interesting way to test a continuation of this theme. USDJPY is breaking higher through the 55-day SMA at 115.50 at which it settled yesterday. USD/CHF could be a possible alternative, as the SNB's Roth's tough talk has failed to put a lid on EUR/CHF and USD/CHF seems to be having a hard time holding the recent lows below 1.1620 - though the technicals are less clear cut there. USD/CAD looks criminally mispriced, but catching a falling knife is always a dangerous occupation.
One interesting data point to notice in the swarm of things going on at present, was the EuroZone CPI estimate, with yesterday's October release suddenly jumping to a 5-year high at 2.6% after being mired below 2.0% for the better part of a year.
The guidance from Norges Bank was very dovish and the pair spiked very shaprly higher, before a 6-dollar (!!) spike in crude oil prices put a lid on the EURNOK situation later in the day. Norges Bank suggested they saw rates at 5.00% in 2010 - a 50 bps downward adjustment from its guidance in June and adjusted inflation forecasts down as well. As long as crude is at these levels, however, the pair is a tough one to buy - there may be room for a move to test the 7.8700 area here, nonetheless, if it stays above 7.7500.
Charts: USDCHF
USDCHF - a bellwether for the USD picture? USDCHF looks like it is at an important pivot area and needs to decide in the upcoming sessions whether the bear market is still alive or whether we are headed for a sharp consolidation higher. The old low was in the 1.1620 area, and this was tested again on the Monday after the G-7 meeting, and then broken again in the last few days. The new lows haven't held well so far as we are trading back at the 1.1620 pivot area again this morning, so USDCHF needs to either pick up the downside again to prove the bearish case, or it is at risk of presenting a false break lower and therefore disappointing the bears with a sharp consolidation higher. Note the importance of the 55-day SMA previously (two areas circled), which is still very far off above 1.1800. The 2004 low is still a long ways off at 1.1290.
Note: the support/resistance levels used in the matrix’s of this document are levels derived from yesterday high, low and close. Reference in the text to other support/resistance levels will occur.
Risk Warnings:
Saxo Bank A/S shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information herein contained. The contents of this publication should not be construed as an express or implied promise, guarantee or implication by Saxo Bank that clients will profit from the strategies herein or that losses in connection therewith can or will be limited. Trades in accordance with the recommendations in an analysis, especially leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits, in particular if the conditions mentioned in the analysis do not occur as anticipated.
Forex Trading
Tips For Global Forex Trading
You’ve decided to become a trader on the Forex market but since you’ve never played on the currency market you aren’t sure where to start. Not to worry – we’ve got some great tips for global Forex trading,
Forex is the foreign exchange market where currencies are bought and sold. It began back in the 1970’s with the introduction of free exchange rates and floating currencies. Thanks to the internet more and more people are able to reap the profits of the currency market with global Forex trading.
This is a market that trades as over US$1 trillion a day. It trades more than any other market. There are some distinct differences in the currency market compared to the stock market. Money moves much faster so no single investor has the ability to actually affect market price and trades are able to open and close within seconds which is not possible on the stock market.
To start your global Forex trading you need to open a Forex account. Just fill in the application and the sign the margin agreement which let’s the broker intervene at any time. That makes sense since it’s the broker’s money that just makes sense.
You need to choose a trading strategy that works for you. Different strategies work for different traders to don’t try to makes something work, instead find the right trading strategy for you.
It’s important to understand that trends move prices so a smart investor will make trends their friend and even go so far as to examine historical trends.
The top five currency pairs are USD/Yen, Euro/Yen, Swiss franc/USD, Pound USD/ and the Euro/USD. Make sure you know and understand them.
Examine the charts at 1 hour, 4 hour, and daily. This will give you the daily trends and plenty of opportunity to trade. Sure you can trade every 15 minutes if you like but that’s not really practical.
Now that you’ve got all your global Forex trading tips you’re ready to see some profits.
You’ve decided to become a trader on the Forex market but since you’ve never played on the currency market you aren’t sure where to start. Not to worry – we’ve got some great tips for global Forex trading,
Forex is the foreign exchange market where currencies are bought and sold. It began back in the 1970’s with the introduction of free exchange rates and floating currencies. Thanks to the internet more and more people are able to reap the profits of the currency market with global Forex trading.
This is a market that trades as over US$1 trillion a day. It trades more than any other market. There are some distinct differences in the currency market compared to the stock market. Money moves much faster so no single investor has the ability to actually affect market price and trades are able to open and close within seconds which is not possible on the stock market.
To start your global Forex trading you need to open a Forex account. Just fill in the application and the sign the margin agreement which let’s the broker intervene at any time. That makes sense since it’s the broker’s money that just makes sense.
You need to choose a trading strategy that works for you. Different strategies work for different traders to don’t try to makes something work, instead find the right trading strategy for you.
It’s important to understand that trends move prices so a smart investor will make trends their friend and even go so far as to examine historical trends.
The top five currency pairs are USD/Yen, Euro/Yen, Swiss franc/USD, Pound USD/ and the Euro/USD. Make sure you know and understand them.
Examine the charts at 1 hour, 4 hour, and daily. This will give you the daily trends and plenty of opportunity to trade. Sure you can trade every 15 minutes if you like but that’s not really practical.
Now that you’ve got all your global Forex trading tips you’re ready to see some profits.
THEMES TO WATCH
THEMES TO WATCH – UPCOMING SESSION
Key event risks today (all times GMT):
Norway Unemployment Rate (0900)
UK Manufacturing PMI (0930)
UK CBI Oct Distributive Trades Report (1100)
US Chhalenger Job Cuts (1130)
US Personal Income and Spending (1230)
US PCE Core (1230)
US ISM Manufacturing (1400)]
Market Comments
Yesterday, we got our highest odds scenario from the FOMC: a 25 bps cut with a change to the statement that reasonably neutralized the forward trajectory of rates. US rates responded sharply to this, with the next EuroDollar STIR contracts on the strip dropping sharply and USD 2-year rates jumping higher on the news. The key differences in the statement were 1) the specific worries expressed about commodity driven inflation: "recent inrease in energy and ommodity prices, among other factors, may put renewed upward pressure on inflation." 2) an expression of the outlook/risks being in balance: "after this action, the upside risks to inflation roughly balance the downside risks to growth." This latter statement is the important addition that effectively gives the Fed maximum flexibility at its next rate setting meeting and future rate cuts are by no means certain. Importantly in the bigger picture - over the past few months, the US data has moved to the background as the obssessive focus was on the credit situation, liquidity problems, and big financial institutions. With this new policy statement, the focus shifts to the data - which is suddenly important again and could trigger at least short-term moves on each new release.
And speaking of incoming data - today we get the ISM manufacturing number and the PCE core and tomorrow the employment report.
We may have seen a key divergence yesterday in terms of the USD and its correlation with the risk aversion/appetite theme. In the recent paradigm, the USD tended to only thrive when risk aversion was high. With a strong batch of GDP data and a more hawkish Fed pushing rates higher, however, the interest rate differentials with the other majors have been reigned in further and make the last leg of USD weakening look unjustified. At the same time, yesterday showed that equity markets are still buoyant and the carry trade seems very much alive. This combined with the still very dovish BoJ and could mean long USDJPY positions would be an interesting way to test a continuation of this theme. USDJPY is breaking higher through the 55-day SMA at 115.50 at which it settled yesterday. USD/CHF could be a possible alternative, as the SNB's Roth's tough talk has failed to put a lid on EUR/CHF and USD/CHF seems to be having a hard time holding the recent lows below 1.1620 - though the technicals are less clear cut there. USD/CAD looks criminally mispriced, but catching a falling knife is always a dangerous occupation.
One interesting data point to notice in the swarm of things going on at present, was the EuroZone CPI estimate, with yesterday's October release suddenly jumping to a 5-year high at 2.6% after being mired below 2.0% for the better part of a year.
The guidance from Norges Bank was very dovish and the pair spiked very shaprly higher, before a 6-dollar (!!) spike in crude oil prices put a lid on the EURNOK situation later in the day. Norges Bank suggested they saw rates at 5.00% in 2010 - a 50 bps downward adjustment from its guidance in June and adjusted inflation forecasts down as well. As long as crude is at these levels, however, the pair is a tough one to buy - there may be room for a move to test the 7.8700 area here, nonetheless, if it stays above 7.7500
Key event risks today (all times GMT):
Norway Unemployment Rate (0900)
UK Manufacturing PMI (0930)
UK CBI Oct Distributive Trades Report (1100)
US Chhalenger Job Cuts (1130)
US Personal Income and Spending (1230)
US PCE Core (1230)
US ISM Manufacturing (1400)]
Market Comments
Yesterday, we got our highest odds scenario from the FOMC: a 25 bps cut with a change to the statement that reasonably neutralized the forward trajectory of rates. US rates responded sharply to this, with the next EuroDollar STIR contracts on the strip dropping sharply and USD 2-year rates jumping higher on the news. The key differences in the statement were 1) the specific worries expressed about commodity driven inflation: "recent inrease in energy and ommodity prices, among other factors, may put renewed upward pressure on inflation." 2) an expression of the outlook/risks being in balance: "after this action, the upside risks to inflation roughly balance the downside risks to growth." This latter statement is the important addition that effectively gives the Fed maximum flexibility at its next rate setting meeting and future rate cuts are by no means certain. Importantly in the bigger picture - over the past few months, the US data has moved to the background as the obssessive focus was on the credit situation, liquidity problems, and big financial institutions. With this new policy statement, the focus shifts to the data - which is suddenly important again and could trigger at least short-term moves on each new release.
And speaking of incoming data - today we get the ISM manufacturing number and the PCE core and tomorrow the employment report.
We may have seen a key divergence yesterday in terms of the USD and its correlation with the risk aversion/appetite theme. In the recent paradigm, the USD tended to only thrive when risk aversion was high. With a strong batch of GDP data and a more hawkish Fed pushing rates higher, however, the interest rate differentials with the other majors have been reigned in further and make the last leg of USD weakening look unjustified. At the same time, yesterday showed that equity markets are still buoyant and the carry trade seems very much alive. This combined with the still very dovish BoJ and could mean long USDJPY positions would be an interesting way to test a continuation of this theme. USDJPY is breaking higher through the 55-day SMA at 115.50 at which it settled yesterday. USD/CHF could be a possible alternative, as the SNB's Roth's tough talk has failed to put a lid on EUR/CHF and USD/CHF seems to be having a hard time holding the recent lows below 1.1620 - though the technicals are less clear cut there. USD/CAD looks criminally mispriced, but catching a falling knife is always a dangerous occupation.
One interesting data point to notice in the swarm of things going on at present, was the EuroZone CPI estimate, with yesterday's October release suddenly jumping to a 5-year high at 2.6% after being mired below 2.0% for the better part of a year.
The guidance from Norges Bank was very dovish and the pair spiked very shaprly higher, before a 6-dollar (!!) spike in crude oil prices put a lid on the EURNOK situation later in the day. Norges Bank suggested they saw rates at 5.00% in 2010 - a 50 bps downward adjustment from its guidance in June and adjusted inflation forecasts down as well. As long as crude is at these levels, however, the pair is a tough one to buy - there may be room for a move to test the 7.8700 area here, nonetheless, if it stays above 7.7500
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