EUR/USD: 1.3000 being a hard bone to break

Tue, Dec 11 2012, 14:29 GMT
by Valeria Bednarik | FXstreet.com Independent Analyst Team

EUR/USD Current price: 1.2987

Greek debt buyback complete, nearing 31 billion Euro debt target; Spain and Italian yields are down from yesterday’s high; stocks post strong recoveries fueling risk appetite; market expects the FED to extend QE tomorrow. And yet the EUR/USD is having a hard time to establish above the 1.3000 level. And why should it? The ECB considered negative rates in its last meeting, and that should sum it all up: a strong euro is not good business to anyone in Europe. And while the dollar is far from strong, if market sentiment turns against the greenback, won’t be the EUR the one to outperform among majors. Better take a look at commodity currencies now, that may shine as China growth concerns ease.

Anyway and for the short term, the EUR/USD hourly chart shows a strong positive mood with price consolidating in between 1.2970/1.3000 ahead of the US opening, with indicators standing in positive territory yet losing some momentum. In the 4 hours chart there is also a positive bias, with 1.3020/30 area as immediate resistance level, to probably be reached over the upcoming hours. The downside remains limited by 1.2930/40 price zone.

Support levels: 12970 1.2935 1.2910

Resistance levels: 1.3000 1.3030 1.3065

GBP/USD Current price: 1.6093

View Live Chart for the GBP/USD (select the currency)

The GBP/USD surged to 1.6100, finding short term resistance in the 78.6% retracement of the latest daily fall, holding a positive momentum according to the hourly chart. Price is finding short term support in the 20 SMA, currently around 1.6080, while indicators in the mentioned time frame hold the positive territory. In the 4 hours chart the upside momentum seems stronger although the pair has a strong static resistance level around 1.6115 that may attract sellers. Clear gains above it are now required to confirm further gains ahead for the GBP.

Support levels: 1.6080 1.6065 1.6025

Resistance levels: 1.6120 1.6150 1.6190

USD/JPY Current price: 82.35

View Live Chart for the USD/JPY (select the currency)

The USD/JPY traded higher in range, finding short term support around 82.30 still trapped in range and with no signs of breaking anytime soon. In the hourly chart, price hovers between 100 and 200 SMA’s, while indicators head south near their midlines, putting some pressure on greenback. In bigger time frames however, the pair maintains a neutral stance that reflects recent range. The upside continues to be favored as long as 81.50 caps the downside.

Support levels: 82.10 81.80 81.50

Resistance levels: 82.30 82.60 82.85

AUD/USD: Current price: 1.0505

View Live Chart for the AUD/USD (select the currency)

Australian dollar surges against the dollar, with the pair battling in the 1.0500/10 area and with a strong upward momentum according to the hourly chart. Still unclear if price will be able to extend to the upside, price needs to extend beyond 1.0510, maybe complete a pullback to the level, and regain the upside to be able to continue rising. In the 4 hours chart technical readings favor the upside with price above 20 SMA and indicators again bouncing north from their midlines.

Support levels: 1.0460 1.0430 1.0400

Resistance levels: 1.0510 1.0550 1.0570

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