FX Thoughts for the Day

USD-CHF @ 1.501/05...Watch Resistance at 1.0520

R: 1.0495-0514 / 1.0549
S: 1.0453 / 1.0432-10 / 1.0392-67

Dollar-Swiss rose to once again test the crucial Resistance at 1.0520, but retreated from there. While that Resistance holds, there are at least 50% (possibly 60%) chances of a fall back towards 1.0435 and lower, later in the day.

In case the market manages to rise past 1.0549 (projected Max High for the Day), it may herald further gains towards 1.0628, enroute 1.0707 next week.

GBP-USD @ 1.9486/90...Will it close above 1.95?

R: 1.9564 / 1.9606-15
S: 1.9460-49 / 1.9414 / 1.9392

The Pound dipped to 1.9465 during the day, buy has bounced back a bit from there. It is imperative that it close above 1.95 today in order to prevent a fall towards 1.9365 (earlier Low on 14-May) and possibly 1.9250. If it does manage to close above 1.95, we could see a bounce back up towards 1.96-97 over the next 2-3 days. Such a bounce would mean continuation of the 1.95-99 range that the market has been in over the past few weeks.

The Bank of England has kept rates steady, in line with market expectations.

AUD-USD @ 0.9517/20...Massive Triangle - take a look

R: 0.9550-75 / 0.9600 / 0.9630-50
S: 0.9500-9485 / 0.9460 / 0.9422

If you look at the Daily Line chart (please click on http://www.kshitij.com/graphgallery/audma.shtml) you will see that that the Aussie is tracing a massive ascending triangle, with the base being the Nov-07 to Jan-08 fall. There is immediate Resistance at 0.9650 and immediate Support at 0.9450 now as the market is coming very close to the Apex of the triangle. A breakout is imminent in either the next few days or a couple of weeks. Whichever way it breaks, it could set off a big, long-lasting trend, giving a lot of opportunity to make money.

Kshitij Consultancy Service
http://www.fxthoughts.com

Legal disclaimer and risk disclosure

These views/ forecasts/ suggestions, though proferred with the best of intentions, are based on our reading of the market at the time of writing. They are subject to change without notice.Though the information sources are believed to be reliable, the information is not guaranteed for accuracy. Those acting in the market on the basis of these are themselves responsibly for any profits or losses that might occur, without recourse to us. World financial markets, and especially the Foreign Exchange markets, are inherently risky and it is assumed that those who trade these markets are fully aware of the risk of real loss involved.

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