FOREX-DD : Forex Daily Analysis: Forex Daily Analysis

Should Be A Quiet Monday In Anticipation Of FOMC Rate Decision

We anticipate a slow start of the week as all eyes are on the FOMC for tomorrow's Rate Decision.

Overnight News Bullets

GE Consumer Price Index MoM/YoY (Aug F), out at -0.1%/1.9% vs. -0.1%/1.9% exp. -0.1%/1.9% prior.
GE CPI – EU Harmonised MoM/YoY (Aug F), out at -0.1%/2.0% vs. -0.1%/2.0% exp. -0.1%/2.0% prior.
FR Current Account (Jul), out at -2.2M vs. -2.0M prior.
IT Industrial Production MoM/YoY (Jul), out at -0.4%/2.4% vs. 0.1%/1.5% exp. -0.5%/-0.1% prior.
E-Z Euro-Zone CPI MoM/YoY (Aug), out at 0.1%/1.7% vs. 0.1%/1.8% prior. -0.2%/1.8% prior.
E-Z Euro-Zone CPI-Core YoY (Aug), out at 1.9% vs. 1.9% exp. 1.9% prior.
US Current Account Balance (2Q), out at -$190.8B vs. -$190.0B exp. -$192.6B prior.
US Import Price Index MoM/YoY (Aug), out at -0.3%/1.9% vs. 0.2%/- exp. 1.5%/0.7% prior.
US Advance Retail Sales (Aug), out at 0.3% vs. 0.5% exp. 0.3% prior.
US Retail Sales Less Autos (Aug), out at -0.4% vs. 0.2% exp. 0.4% prior.
US Industrial Production (Aug), out at 0.2% vs. 0.3% exp. 0.3% prior.
US Capacity Utilization (Aug), out at 82.2% vs. 82.0 exp. 81.9% prior.
CA Manufacturing Shipments (Jul), out at 2.3% vs. 1.0% exp. -1.8% prior.
CA Labor Productivity (2Q), out at 0.2% vs. 0.4% exp. 0.7% prior.
US U. of Michigan Confidence (Sep P), out at 83.8 vs. 83.5 exp. 83.4 prior.
US Business Inventories (Jul), out at 0.5% vs. 0.3% exp. 0.4% prior.
US Baker Hughes U.S. Rig Count (Sep 14), out at 1787 vs. 1814 prior.

O/N Data Heat map:

EU	US	JP	UK	SZ	AU	CA	NZ	NO	SE	FR
	-					+

Calendar

Today's Highlights:

Time (GMT)	Region	Release	Consensus
08:00	NO	Trade Balance (AUG)	26.0B
08:00	NO	Exports / Imports (AUG)	61.1B / 35.0B
09:00	EC	E-Z Trade Balance (JUL)	7.0B
12:30	CA	International Securities Transactions (JUL)	-C$1500
12:30	US	Empire Manufacturing (SEP)	18.0
15:00	SZ	SNB’s Roth Holds Speech in Vezia
23:50	JN	Tertiary Industry Index MoM (JUL)	-0.5%

This and Next Week’s Highlights:

Date	Region	Release
18 Sep	AU	Reserve Bank Governor Steven speaks
18 Sep	JN	BoJ Monetary Policy Meeting
18 Sep	SZ	Industrial Production
18 Sep	SW	GDP
18 Sep	UK	A string of CPI’s , Retail Price Index
18 Sep	GE	ZEW Survey (Econ. Sentiment), ZEW Survey (Current Situation)
18 Sep	EC	ZEW Survey (Econ. Sentiment)
18 Sep	US	A string of PPI’s , Net Long-Term TIC Flows, Total Net TIC Flows, NAHB Housing Market Index, FOMC Rate Decision Expected , ABC Consumer Confidence
18 Sep	CA	New Motor Vehicle Sales

What's going on?

News last Friday that Britain's financial authorities had stepped in to rescue U.K.'s forth largest mortgage bank Northern Rock refueled the fears of a wider spread of the credit crisis and dragged the value of Sterling down. Northern Rock's share price dropped 33 percent last week and expectations are for the company to be split up or acquired in coming weeks.
A public holiday in Japan kept the yen subdued, with the currency markets largely awaiting Tuesday's Fed rate decision meeting. The market expectations lean towards a 25 bp rate cut from the current 5.25% and a smaller group of surveyed analysts expect a 50 bp cut.
Oil prices on Monday continued to retreat from last week's record highs on speculation of slowing U.S. demand and news of tropical storm Ingrid fading off in the Atlantic over the weekend. Crude oil for October delivery fell as much as 71 cents to $78.39 in after-hours trading on NYMEX.

FX

USD marginally lower through last week, but Majors remain range bound ahead of Tomorrow's Fedrate decision. Carry remain supported

EUR	USD	JPY	GBP	CHF	AUD	CAD	NZD	NOK	SEK	PLN
	-	(+)	-	+

FX Trading Strategies

Pair	Supp.	Resis.	Comments
GBPJPY	228.25	234.75	We find GBP as an attractive short today as fundamentals are troublesome. The problems in the financial sector adds pressure on the downside. We sell the break of 230.78 offer, targeting 228.25, stop bid at 231.08 bid.

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FOREX : Foreign Exchange Market

FOREX is a word play on the term Foreign Exchange Market. It is a market for buying and selling of currencies from all over the world. Certainly, such transactions are bound to be voluminous. It is just an estimate that there are about transactions of $1.5 trillion USD on a daily basis in the FOREX. Now just compare this with the paltry $300 billion USD a day transactions for the US Treasury Bond and the $100 billion a day transactions for the US Stock Exchange.

The FOREX came into existence in 1971 when the fixed currency exchanges were abolished. Currencies no longer had fixed values after that; on the contrary, their rates (mostly taken in comparison with the USD) were fluctuating, and changed on a daily basis. Throughout the seventies and the eighties the FOREX grew steadily, showing more advancement in the later years. The market has stupendously grown from $70 billion USD a day to the staggering amount that it transacts today on a daily basis.

There are actually about five thousand trading institutions in the FOREX. These include international banks, central government banks such as the US Federal Reserve, and commercial companies and brokers for all types of foreign currency exchange. The best thing that shows the unbiased nature of the FOREX market is that it has no fixed headquarters anywhere – it operates primarily from all major cities like New York, Tokyo, London, Hong Kong, Singapore, Paris, Frankfurt, etc. One can even use the telephone or the internet to make the transactions. The major businesses at the FOREX are the buying and selling of products in other countries. Several transactions are also conducted from the currency brokers or traders who stand to make small profits with the daily fluctuations in the market.

Most of the FOREX business is centered on big banks and financial institutions, but it doesn’t mean that the FOREX is inaccessible to small investors. The recent changes in the financial regulations have effectuated this accessibility. Earlier, a minimum transaction size was required to conduct business with the FOREX. But the current rules have made it possible to break large inter-bank units into smaller bits. Each bit is worth as less as $100,000. This makes it possible to each individual investor through loans that are extended for trading, known as leverage. The ratio to control the lots is 100:1. This means, every $1000 USD will allow one to control $100,000 on the FOREX.

The benefits of trading with the FOREX are mentioned below:-

(1) Liquidity of Investments – As the FOREX is a huge market, the funds have a very high degree of liquidity. This is because of the presence of the international banks who provide their bids and carry out a large number of transactions on a daily basis. Therefore, there is always a buyer or seller for any type of currency.

(2) Highest Degree of Accessibility – The FOREX is open 24 hours a day for 5 days a week. Every Monday morning the exchange opens at Australian Standard Time and closes on Friday afternoon at New York time. Greater accessibility is provided because the transactions can be conducted from the person’s home or office.

(3) Open Market – At the FOREX, there are no secrets. All the fluctuations that occur in the market are made accessible to everyone at the same time. There is no insider trading in the FOREX.

(4) No Commission – There is no hassle of paying commission to the brokers in the FOREX. Here the brokers earn by setting up a difference between the buying price and the selling price of a currency, which is known as a spread.

It must be understood by now that for the FOREX to work effectively, the currencies must always be traded in pairs. For instance, the Japanese yen must be traded against the euro. When one kind of currency is sold, there should be another to be bought in its stead.

The profit happens because there is always mobility between the different currencies. Even if there is a miniscule change in the exchange rate, then it could mean substantial changes in the profits due to the large amount of money involved in the transactions. People are thronging to the FOREX and not any other institution due to the trust that they have in it. To add to the advantage, the market is absolutely well-advanced and uses sophisticated software for dealing out its transactions.

FOREX-DD : Forex Daily Analysis

Forex Daily Analysis - Monday, Sep 17th