USD Bid Ahead of ISM Figures | | |
Market activity was limited yesterday as US and Canada were closed for Labor market day, so the action was dominated by range trading.
Overnight News Bullets - SZ GDP (2Q) out at 0.7/%2.8% vs. 0.7%/2.4% expected.
- E-Z PPI MoM/YoY (Jul) out at 0.3%/1.8% vs. 0.1%/1.7% expected. Prior at 0.1%/2.2%.
- E-Z GDP QoQ/YoY (2Q P) out at 0.3%/2.5% as expected.
- E-Z Gross Fix Cap (2Q P) out at -0.2% vs. 0.0% expected.
- E-Z Household Consumption (2Q P) out at 0.5% as expected.
- E-Z Govt. Expenditures (2Q P) out at 0.1% vs. 0.3% expected.
- E-Z GDP Forecasts unchanged. Q4 expected at 0.2-0.8%, Q1 2008 at 0.2-0-9%.
- US ISM Manufacturing (Aug) out at 52.9 vs. 53.0 expected. Prior at 53.8.
- US ISM Prices Paid (Aug) out at 63.0 as expected. Prior at 65.
- US Construction Spending MoM (Jul) out at -0.4% vs. 0.0% expected. Prior at 0.1% , revised from -0.3%.
- UK Nationwide Consumer Confidence (Aug) out at 94 as expected. Prior at 96.
- AU RBA Cash Target rate out unchanged at 6.50% as expected.
- AU AiG Performance of Service Index (Aug) out at 51.6 vs. 56.0 prior.
Market FX: USD higher across the board, but was capped after the ISM figures. JPY well bid through the Asian session. 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 | EC | PMI Composite (AUG) | Prior 57.2 | | 09:00 | EC | Euro-Zone Retail Sales MoM/YoY (JUL) | 0.3% / 1.1% | | 11:00 | US | MBA Mortgage Applications (AUG) | Prior -4.0% | | 11:30 | US | Challenger Job Cuts YoY (AUG) | Prior 15.4% | | 12:15 | US | ADP Employment Change (AUG) | 80K | | 13:00 | CA | Bank of Canada Rate (SEP) | 4.50% | | 14:00 | US | Pending Home Sales MoM (JUL) | -2.0% | | 18:00 | US | Fed’s Beige Book | | | 23:50 | JN | Ministry of Finance (MoF) Foreign Net Stocks Invest (AUG) | Prior JPY13B | | 23:50 | JN | Ministry of Finance (MoF) Foreign Net Bonds Invest (AUG) | Prior JPY976.5B | This and Next Week’s Highlights: | Time (GMT) | Region | Release | Consensus | | 08:00 | EC | PMI Composite (AUG) | Prior 57.2 | | 09:00 | EC | Euro-Zone Retail Sales MoM/YoY (JUL) | 0.3% / 1.1% | | 11:00 | US | MBA Mortgage Applications (AUG) | Prior -4.0% | | 11:30 | US | Challenger Job Cuts YoY (AUG) | Prior 15.4% | | 12:15 | US | ADP Employment Change (AUG) | 80K | | 13:00 | CA | Bank of Canada Rate (SEP) | 4.50% | | 14:00 | US | Pending Home Sales MoM (JUL) | -2.0% | | 18:00 | US | Fed’s Beige Book | | | 23:50 | JN | Ministry of Finance (MoF) Foreign Net Stocks Invest (AUG) | Prior JPY13B | | 23:50 | JN | Ministry of Finance (MoF) Foreign Net Bonds Invest (AUG) | Prior JPY976.5B |
What's going on? - USD strong despite weak fundamentals, but selling off marginally after the ISM figures. Today’s figures could take it lower. EURUSD unable to close below the 200 day MA.
- A small equity post-holiday rally in the US paced by Tech and energy shares, suspecting that the sell-off isn’t justified by corporate earnings.
- Rally carries Crude oil towards four-week high, as the rising share prices incite confidence in economic growth.
FX ![http://www.saxobank.com/__DotNet/Site/Analysis/GetImage.aspx?ResUID=cbf6dfdf-a987-4e4f-8a8b-4d1bcec67a50]()
| EUR | USD | JPY | GBP | CHF | AUD | CAD | NZD | NOK | SEK | PLN | | | - | | | + | + | + | | + | | | FX Trading Strategies | Pair | Supp. | Resis. | Comments | | USDCHF | 1.1985 | 1.2230 | Break-out-play in USDCHF. We prefer the downside fundamentally, but respect an upward move placing orders on both sides. Sell the break of 1.2092 offer, stop bid at 1.2110, targeting 1.20. To the upside we buy 1.2152 bid, stop offer at 1.2132 offer, targeting 1.2204. | ________________________________________________________________________________________ |
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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.
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