Daily FX Report

Good morning from still warm and sunny Hamburg. Today we are expecting the EZ producer prices to not become as hot as the temperature out there is. Indeed, when we look outside at the Elbe river, the temptation becomes higher and higher to jump in it, despite of the dirty harbor water.

Markets review

The surging oil price drove the Swiss consumer price inflation to a 14 ½ year high in May about 0,8% in relation to April which makes an annual inflation rate of 2,9%. That leaves the SNB without leeway to cut interest rates soon. The USD/CHF reacted with a loss of 0,49% at 1,0371 at closing and the session low at 1,0323.

The AUD response is relatively unhurried about the rate decision from RBA - which is to keep the interest rates steady at the high level of 7,25%. The AUD/USD rose 0,14% and is traded at 0,9549 currently. Yesterday the AUD/USD jumped 30 pips to a session high at 0,9567 after data on building approvals and Q1 current account came out better than it was expected.

The USD fell against the JPY on Monday and gave up gains versus the EUR after the rating agency Standard and Poor's had downgraded the US financial sector firms. The USD extended losses against the JPY to a low at 104 and closed the session at 104,43. Against the EUR the USD closed the day almost flat with a profit of 0,1% at 1,5566 after rebounding from its session low at 1,5485.

Technical analysis

USD/CAD

The horizontal trend direction in the USD/CAD stopped in the middle of May. A drop down to 0,9811 was followed by a recovery phase. The strong up trend could bring the currency pair to break through the old support level at 0,9983. This might be a sign for further long potential and a comeback in the trend channel.

NZD/USD

The down trend channel, which has been established since the end of March, might be over. After the NZD/USD hit the bottom at 0,7534 the recovery was so strong that it has crossed the resistance at 0,7789. This movement stopped the trend channel and the resistance changed to a new support level.

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