Why Trade Forex?

The main reasons for embarking in a new business adventure are to improve your earning power and enhance your lifestyle. So, is trading Forex Market a good choice? Yes, it is because the opportunities of achieving good profits are very real. However, caution is advised as Forex is a gigantic entity that is capable of vicious movements without warning.

As such, it is essential that you develop the correct mindset in order to cope with everything Forex can throw at you. The following description of Forex will undoubtedly show that it is definitely worth your time achieving a winning psychology that will enable you to trade successfully.

So what is Forex? Forex stands for FOReign EXchange and is also known as FX. The Foreign Exchange Market (Forex) involves the simultaneous buying of one currency and the selling of another. Today, Forex is one of the largest and most liquid financial markets in the world which includes trading between large banks, central banks, currency speculators, corporations, governments, other institutions and ordinary folk such as you and me. The daily turnover of this market is reported to be well in excess of $3 trillion compared with about $25 billion dollars traded daily on the New York Stock Exchange.. The purpose of Forex is to facilitate trade and investment. All the US equity markets combined do not reach 3% of the volume traded on the FX market.

Most trades are focused on the biggest, most liquid currency pairs called the ‘Majors’ which include US Dollar(USD)(FREE stock trend analysis), Japanese Yen(YEN), Euro(EUR), British Pound(GBP), Swiss Franc(CHF), Canadian Dollar(CAD) and Australian Dollar(AUD). In fact, more than 85% of daily forex trading happens in these major currency pairs i.e. EUR/USD, YEN/USD, GBP/USD, USD/CHF, AUD/USD and USD/CAD.

As currencies are traded in pairs, you can profit from an exchange rate move by purchasing the currency that you expect will strengthen and sell the other. For example, if you believed that the Euro (EUR) is going to appreciate against the dollar (USD)(FREE stock trend analysis), you would buy the EUR/USD or, more simply put, buy the EUR and sell the USD. Alternatively, if you believed that the EUR was going to depreciate against the USD then you would sell the EUR/USD.

When you buy shares in a particular company, you are in effect investing your money in that company. You hope the company will be successful and prosper, so the value of your shares will increase. In just the same way, when you buy the currency of a particular country on Forex, you are investing your money in the economy of that country. If the economy of the target country is healthy, then the value of your currency will increase, and you will make a profit.You can trade Forex using borrowed capital. This is called Margin Trading. Margin trading is where you use between 0.5 and 4 percent of your own money to control a much larger amount of borrowed money. This enables you to leverage your investment. Forex is traded in lots whereby a standard lot is worth $100,000. Some dealers allow you to trade in smaller lots called Mini-lots and Micro-lots.

FOREX-U.S. dollar hits 3-1/2-month high vs euro

The dollar rose to its highest level against the euro in more than three months on Thursday, a day after the Federal Reserve drew attention to the improvement in the U.S. economy and stood by plans to wind down most of its emergency lending by February.

The euro, which tumbled to near $1.43 for the first time since September, also struggled after Standard & Poor's became the second rating agency to downgrade Greece in just over a week, stoking fears about the public finances of the euro zone member.

The dollar's gains were tempered by data showing U.S. jobless claims unexpectedly increased last week, although a rise in a regional U.S. factory index kept the greenback near a two-month high against sterling and up 1.5 percent on the Australian dollar. For more, see [ID:nN17380585].

"The dollar's rally is due to a combination of several factors -- the residual effects from the Fed's upbeat statement on the U.S. economy and also the view that monetary policy could be normalized sooner than most people thought," said Omer Esiner, senior market analyst at Travelex Global Business Payments in Washington.

"There are also mounting concerns about Greece and that has weighed on the euro. Greece could be symptomatic of the broader fiscal problems in the euro zone."

The euro fell more than 2 cents to $1.4305 EUR=, according to Reuters data, its lowest level since Sept. 7. It was last at $1.4351, down 1.3 percent on the day and on track for its biggest daily decline in two weeks. The euro also fell against the yen, down 1.2 percent to 128.98 yen EURJPY=.

Light trading volume ahead of the holidays may have contributed to the scope of the dollar's gains, as did investors squaring up their portfolios before year-end.

Assets that have gained over the course of the year such as stocks, commodities and emerging market currencies have come off going into the year-end on profit-taking and this has benefited the dollar, traders said.

Against the yen, the dollar rose 0.1 percent to 89.87 yen JPY=, its third straight day of gains against the Japanese currency. Analysts said a recent push higher in U.S. bond yields reflected U.S. economic improvement while Japan faces deflation risks.

Marc Chandler, head of global currency strategy at Brown Brothers Harriman in New York, believes, however, that the dollar's gains are more about technical factors and less about a shift in U.S. interest rate expectations.

"We continue to believe that the primary factor behind the dollar's rally in recent weeks is largely technical in nature having to do with year-end considerations. In turn that implies that the foreign currencies are likely to bounce back in early 2010 before a more sustainable dollar rally ensues," he said.

To be sure, the Fed gave no indication in Wednesday's statement that it was set to raise interest rates from near zero percent, stressing that rates would stay low for an extended period. But it highlighted improvements in the economy, which markets have seen reflected in a slower pace of job losses and improved retail sales data.

Greek assets, meanwhile, took a lashing after Standard & Poor's cut Greece's rating by one notch to BBB-plus from A-minus late in European hours on Wednesday. [ID:nLDE5BG1RK]

Sterling hit a two-month low below $1.61 and was last down 1.1 percent at $1.6160 GBP=. The dollar also hit a 3-1/2-month peak against a basket of currencies .DXY at 77.943.

The Norwegian crown fell sharply versus the U.S. dollar, a day after the Norges Bank surprised the market with an interest rate increase to 1.75 percent. The dollar was last at 5.8643 crowns, up 1.81 percent NOK=. (Additional reporting by Steven C. Johnson; Editing by Leslie Adler)

Forex reserves down at $279.91-bn

India's foreign exchange reserves fell further to USD 279.91-billion for the week ended September 25 as compared to USD 280.77-billion in the previous week.

The foreign currency assets (FCA) declined to USD 263.498-billion, falling by USD 855-million, from USD 264.353-billion the week before, Reserve Bank said in its weekly report on Friday.

Foreign currency assets expressed in US dollar include the effect of appreciation or depreciation of non-US currencies (such as Euro, Sterling, Yen) held in reserves, the central bank said.

During the week, the gold reserves stood unchanged at USD 9.828-billion while Special Drawing Rights (SDRs) dropped marginally to USD 5.220-billion from USD 5.224-billion the week before, RBI said.

The country's reserves position in the International Monetary Fund stood at USD 1.364-billion during the period, RBI said.

Daily Forex Report - USD erases nfp gains in volatile trade, ECRI at record high

Overview
The USD traded mixed ahead of today's release of US unemployment with the USD supported by safe haven flows as global equity markets continued to decline, JPY supported by a statement from Japan's finance minister that JPY strength will not be distressed at this weekend's G-7 meeting in Istanbul, and commodity currencies pressured by concern that the global economic recovery will be slow. EUR traded higher supported by report of rising EU producer prices and ECB rate hike speculation. GBP drifted lower pressured by report of a decline in UK construction PMI with downside limited by report that UK house prices rose for the fifth month in a row. There was a lot of rhetoric ahead of the G-7 meeting with US Treasury Secretary Geithner stating that a strong USD is important to the US. Reuters reports that EU officials applaud US statements favoring a strong USD. Thursday Fed Chairman Bernanke said Bernanke's there is no immediate risk to USD reserve status and that a strong USD is very important to the US. Over the past few days EU officials have expressed concern about EUR strength versus the USD. French Finance Minister Legarde says that the USD will be discussed at this weekend's G-7 meeting. US September unemployment rate rose to its highest level in 26 years to 9.8%. September nonfarm payrolls declined by a larger than expected 263k. The largest jobs losses were in construction, manufacturing retail trade and government. Since the start of the recession in December 2007 the number of unemployed has increased to 15.1 mln. The USD extended early gains in reaction to the worse than expected nonfarm payrolls as the data generates concern about the potential strength of the US economic recovery. USD gains were limited by statement from Pimco's Gross that he believes the US wants a weaker USD. USD traded lower in reaction to the release of the Economic Cycle Research Institute (ECRI) inflation index which showed a sharp rise in September. The ECRI gauge hit an 11 month high. The ECRI says that US inflation is on the cusp of a cyclical upswing. The ECRI yearly growth rate hit a record high last week. The ECRI says US recovery is unlikely to falter anytime soon. August factory orders posted an unexpected decline. Today's USD price action is difficult to explain and as recovery doubts contribute to rising risk aversion. In the past the USD has benefited from risk aversion. Today's USD price action may be signaling a delinking form the correlation to risk sentiment.

Today's US data:
September unemployment rose to 9.8%. September nonfarm payrolls declined by 263k, a 180k decline was expected. August factory orders declined by 0.8%, a 0.7% rise was expected. This marked the first decline in factory orders since March. Today's US economic data suggests that the road to US economic recovery will be bumpy and recovery may be weak.

FOREX-Dollar near 1-year low as stocks, commodities rise

The U.S. dollar fell to its lowest in almost a year on Tuesday after gains in global stocks fed into renewed risk appetite as trading volume picked up at the end of summer holidays in the United States.

Some analysts said the U.S. dollar may resume seasonal declines as volume increases after a brief period in which the greenback rose following upbeat economic indicators.

A rally in gold prices above $1,000 and concerns over the dollar's long-term status as the world's reserve currency, sparked by a United Nations report on Monday, also undermined demand for the greenback. [ID:nL7696421].

The dollar slumped to its lowest in almost a year against a basket of major currencies while the euro broke above a key options barrier at $1.4450 EUR=, traders noted.

G-20 Pledge Contributes to Forex Rally

The U.S. Dollar was trading weaker at the midsession in a continuation of the rally that started last night. Stronger equity markets are helping to fuel a greater desire for higher risk assets. The G-20’s pledge to continue providing stimulus is most likely the biggest factor contributing to the rally. The thought of pumping more money into the global economy has triggered renewed demand for equities and commodities with metals leading the way. Traders are also reacting to renewed questions about the role of the Dollar as the world’s number one reserve currency.

The EUR USD made a new high for the year in a move that fueled a strong breakout to the upside. German economic reports this morning offset each other, leading to the belief that this rally is being fueled by a desire for higher yielding assets. This morning’s reports showed a rise in German exports but weakness in German industrial production.

An unexpected rise in British industrial production along with greater demand for higher yielding assets is helping to support the rally in the GBP USD. This market has now regained 50% of its August break. Some of the rally could be contributed to position squaring ahead of this week’s Bank of England meeting. In light of the recent improvements in the economy, traders are curious as to whether the BoE will make adjustments to its quantitative easing program.

The USD JPY is under pressure as a desire to hold Japanese Bonds over U.S. Bonds is fueling demand for the Yen. The carry trade does not seem to be a factor today even though U.S. equity markets are trading higher.

China's economic aggregate ranks third in the world

The euro rallied sharply versus major rivals Tuesday in New York as global stocks gained, adding to risk appetite. The European currency moved to an 8 1/2-month high against the struggling dollar and also hit near-term bests against the yen and pound.

German exports increased for the third month in a row in August on rising global demand. The better-than-expected export growth helped the trade surplus to increase surprisingly, strengthening recovery hopes.

The euro surged to 1.4534 against the dollar, its highest level since mid-December. The greenback saw notable weakness across the board.

Former Federal Reserve Bank Chairman Alan Greenspan said Monday that banks in the U.S. need to hold more capital on their balance sheets and that the liquidity infused into financial systems by the world's central banks poses an inflation threat.

The euro climbed to a six-day high of 0.8787 versus the British pound. The rise took the European currency away from a 10-day low of 0.8703 from last week.

UK's Office for National Statistics report showed that manufacturing output grew 0.9% in July from June. Economists had expected only 0.3% monthly increase for July. Meanwhile, industrial output recorded a monthly rise of 0.5% in July.

The euro inched up to a weekly high of 133.85 against the Japanese yen. The European currency has been trending to the upside since late last week.

Japan's current account surplus narrowed in July from the previous year, mainly due to a fall in the income surplus and the widening of the services deficit, an official report showed today. The Ministry of Finance said the current account surplus dropped 19.4% year-on-year to 1.26 trillion yen from 1.57 trillion yen in the previous year. The surplus was also lower than 1.45 trillion yen surplus estimated by economists, although it increased from June's surplus of 1.15 trillion yen.

In Germany, exports rose by a calendar and seasonally adjusted 2.3% month-on-month in July, slower than a downwardly revised 6.1% increase in June, but larger than the 1.2% rise expected by economists. Annually, exports slipped 18.7% to EUR 70.5 billion.

Meanwhile, German industrial output dropped 0.9% month-on-month in July, the Federal Ministry of Economics and Technology said Tuesday. That was the first fall in three months.