Daily FX Report

Good morning from wonderful Hamburg. It is Friday and all traders are looking for the weekend. The time is running fast and with the next month the first half of 2008 is over. In Hamburg should be nice weather at the weekend so we have good conditions to have a fine barbecue. We wish all readers of the Varengoldbank's Daily FX Report a nice weekend.

Markets review

The freshest news from this morning is, that the German retail sales fall 1,7% in April. This loss is much more than experts expectations for a 0,6 % increase. On the yearly base the retail sales data fall 1,0 % against forecasts for a 1,9 % pace of decline. Euro is knocked lower on this messages and EUR/USD is falling about 40 pips to 1,5487.

During the week USD/JPY was jumped as much as 2,4 % to its 3-mth high of 105,88. The USD slips vs. JPY in the last night Asia trading session. Some traders said these moves came from Japanese exporters and their active USD sells. USD/JPY edges down 0,2 % on the session to 104,34.

British consumer confidence fell to -29 in May. This is the lowest level since 1990. Also separate data from pay consultant IDS shows that median UK pay deals eased about 3,2 % in 3 months to April. GBP/USD slips to a day's low of 1,9740 down, from around 1,9760 before the data.

Technical analysis

EUR/JPY

In EUR/JPY was a strong bullish trend from the middle of March till the middle of April. With its abortive try to break the 165 mark the market recovered after his up rally. Since the middle of May the market moves slowly in the direction of 165 again. If it would break through this mark it could come up a new strong support at this level with more bullish potential.

GBP/CHF

With the beginning of February GBP/CHF started a bearish trend with its lowest level in the middle of April. With a following recovery the market gave hope to the traders for bullish markets. A side move period started in May, which ended with the break of its upper channel line. When this break is effective the market could come back to bullish moves.

Pivot Points - Daily FX Support and Resistance Levels

Daily Calendar & Key FX Events

Varengold Bank

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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

Daily FX Report - By Varengold Bank