InvestMacro FX

U.S. Manufacturing data, released today by the Institute for Supply Management, showed that manufacturing activity contracted in January for the twelveth straight month. January’s ISM Report On Business index readings for economic activity were at 35.6 percent, an increase from December’s revised 32.9 percent but still in monthly contracting territory. A score above 50 is considered to be growth while a less than 50 score is considered to be contraction or negative growth in that sector. January’s score came in above economic forecasts which were expecting a 32.5 percent reading.

Details of the report showed that new orders for manufactured goods increased in January with a 10.1 percent gain over December while the prices index also gained by 11.0 for the month. New orders, despite the monthly increase, have now fallen for 14 straight months and the prices index has fallen for 4 straight months.

Manufacturing production saw an increase of 5.6 percent for the month while employment showed no change from December. Inventories fell by 2.1 percent while exports grew by 2.0 percent and imports fell for the month by 2.5 percent.

Norbert J. Ore, chair of the ISM Business Survey Committee, commented on the manufacturing industry in the report, “January marked 12 months of contraction in the manufacturing sector. However, the rate of decline as measured by the PMI was slower than experienced in December. The January New Orders Index is at 33.2 percent, up from the seasonally adjusted 23.1 percent recorded in December. While this is a significant month-over-month improvement, it is still a sign of continuing weakness in the sector. Comments from our respondents indicate that it will take a recovery in automobiles and housing for the manufacturing sector to once again prosper. On a positive note, the Prices Index continues to indicate significant deflation in the prices that manufacturers have to pay for their inputs, and this should ultimately be good for the consumer.”

US Dollar mixed in Forex Trading.

The U.S. dollar has been mixed in forex trading today against the major currencies. The dollar has gained against the British pound, Australian dollar, Canadian dollar and New Zealand dollar while falling versus the euro, Japanese yen and Swiss franc.

The euro has gained versus the dollar from today’s 1.2721 opening to trading at approximately 1.2819 at the end of the US trading session at 5:12pm EST. The British pound has declined today versus the dollar from 1.4380 to trading at 1.4252 dollars per pound. The dollar has fallen against the Japanese yen today as the USD/JPY has declined from its 89.63 opening rate to trading at 89.35.

The dollar has advanced against the Canadian dollar after opening at 1.2328 earlier today to trading later at 1.2436. Against the Swiss franc, the USD has lost ground from the 1.1649 opening to trading at 1.1622.

The New Zealand and Australian dollars are both little changed against the US dollar from their opening exchange rates. The NZD/USD currently trades at 0.5029 after opening at 0.5032 while the AUD/USD trades at 0.6310 after opening today at 0.6319.

USD/CAD Chart – The USD gaining today against the Canadian Dollar in Forex Trading.

Source: FOREXYARD

The USD rose to the highest level in almost two months against the European currency ahead of a report tomorrow will show European producer prices slid a fifth month, giving the European Central Bank (ECB) more room to cut Interest Rates. As inflation is slowing and the Euro-Zone economy deteriorates, the Dollar is likely to increase further to as much as $1.27.

Economic News

USD – U.S. Senate Might Reject Obama Stimulus Plan; USD Could Suffer

After last week’s surprising bullishness against the EUR, the USD may be positioned to rise back up to price levels not seen since November. Ending last week at 1.2811 against the EUR, the greenback broke through a number of significant price barriers and continues to hold ground. However, the USD did not gain strength against every major currency. Against the British Pound the Dollar actually weakened to 1.4484 down from the 1.3660 seen at the start of the week.

With the week starting with troublesome news about Obama’s stimulus package potentially being killed in the U.S. Senate, the USD may stand to lose ground if action is not taken soon to help the economy recover. U.S. Republicans stand in opposition to this economic stimulus package as it appears to be in favor of excessive spending and a lack of focus on areas which Republicans feel need more attention, such as housing. But if this package is killed in the Senate, will there be quick enough action to come up with a new package which will appease both sides of the partisan divide in time to rescue the U.S. economy from entering a deeper recession?

This week’s upcoming news may indeed turn out negative for the U.S. economy, and the U.S. Dollar as a result. With Non-Farm Employment Change and the Unemployment Rate reports predicted to indicate a drop in employment across the United States, the U.S. currency will no doubt feel a pinch. Last week’s 11th-hour rally may in fact get reversed by mid-week unless the results from these reports turn out better than forecasted. Otherwise, traders should look for a weakening of the USD back to levels above 1.3000 against the EUR.

EUR – EUR Experiences Bad Week; Could this Week be Worse?

The EUR witnessed a significant drop at the end of last week versus the USD, Pound Sterling, and Yen, as investors lost more confidence in the 16-nation currency. As the economic downturn worsens, traders and investors alike are searching for a proper safe-haven to store their money. Dropping below 1.2900 against the USD and falling farther away from parity with the British Pound last Friday to hit a recent low of 0.8800, the EUR has seen better days.

With most fundamental data being released about the U.S. stimulus plans and British banking crisis, the EUR appears to be receiving little attention. With this week’s monetary policy meeting on the Euro-Zone interest rates looming, traders, while anticipating a decision to hold rates steady, perceive the EUR as a weak investment option compared with stronger safe-havens such as the U.S. Dollar. However, upcoming news about the U.S. Senate potentially refusing to pass President Obama’s stimulus package, the EUR may benefit from an unwinding of Dollar positions in exchange for an alternative investment.

This week will, however, be an important week for the Euro-Zone economies. The European Central Bank (ECB) will be meeting to discuss interest rates, as will the Bank of England (BoE). These two rate decisions being held simultaneously could potentially guarantee that the two currencies of these regions – the EUR and GBP – may witness high volatility in anticipation of these rate decisions. As interest rate decisions lately typically revolve around rate reductions, traders are likely to see early sell positions being taken on these currencies, which will drive their value lower in the coming days.

JPY – Japanese Yen Maintains Holding Pattern

The Japanese Yen continues to trade in a limited range of prices as its economy remains largely on track to continue its recession. As the Japanese economy weakened in recent months, the JPY was pushed higher as a result of Japan’s monetary and fiscal policies which intentionally held the Yen at an artificially low level while economic growth was bounding. As this growth unwinds and global interest rates are cut, the Japanese Yen reaps the benefits. But does this help Japan?

As is typically expected, there is not much fundamental data coming from Japan this week. Forex traders can expect the Yen to maintain its recent holding pattern as it awaits news from the European economies about this week’s upcoming interest rate policy meetings. If European rates continue falling, the Yen is likely to experience another period of appreciation. If rates are held steady, risk appetite may help push the island currency above the price level of 91.00 against the USD and 121.00 against the EUR.

Oil – Crude Oil Prices Expected to Dip

After a couple days of trading around the $41 price range, the price of Crude Oil appears to be preparing for a week of downward movement. Recent recessionary fears carry the potential to push the price of this commodity below $40 a barrel for the first time since March contracts began trading. A few Middle Eastern oil producers have downgraded their growth forecasts as a result of declining prices, as well as speculation of a continuation of these downward price trends.

News surrounding the price of Crude Oil doesn’t appear to be providing much information that hasn’t already been stated time and time again by many analysts. The global recession still holds full sway over commodity prices. This growth slump maintains downward pressure on the price of Crude Oil, and will continue to do so into the near future.

Technical News

EUR/USD

The Slow Stochastic and the RSI on the daily chart are showing a continuation of the current bearish correction. There is also a very accurate bearish channel forming on the 4 hour chart. In addition, all indicators on the hourly chart are pointing down. Going short might be the right choice today.

GBP/USD

Ever since bottoming at the 1.3750 level, the pair is galloping upward with full steam ahead and is currently traded around the 1.4414 level. The daily chart is providing exclusively bullish signals; implying that another bullish session is forthcoming and the 1 hour chart support that notion. Going long seems to be the right strategy today

USD/JPY

The pair has been range-trading for a while now, with no specific direction. The Daily chart’s Slow Stochastic providing us with mixed signals. All oscillators on the 4 hour chart do not provide a clear direction as well. Waiting for a clearer sign on the hourlies might be a good strategy today.

USD/CHF

According to a daily chart this pair is still floating in a neutral territory with no distinct price direction. However a cross above the 70 line on the hourly chart’s Slow Stochastic is indicating that the next move is likely to be bearish. Traders should wait for the breach and swing.

The Wild Card – AUD/USD

There is a very accurate bearish channel forming on the 4 hour chart, as the pair has consecutively dropped for the past three days. Currently, as the RSI on the daily chart is floating below the 50 line and the Slow Stochastic is pointing down, the pair might extend its bearish trend. This might be a great opportunity for forex forex traders to join a very popular trend.

Market Analysis provided by Forex Yard.

Pushing below 1.2800 against the EUR last Friday, the USD has seen some intense ups and downs ever since. In early trading hours Friday, the USD saw some significant gains against its primary European counterpart, but then turned around to lose it all, ending the day at 1.2970. Today, however, the USD appears to be back on the upswing. Starting the trading day with a sharp 50 pip gain against the EUR, the USD appears to be on track to recover the position it was heading for during Friday’s early trading hours.

As confidence in the European markets dwindles, the U.S. Dollar appears more and more to be the safe-haven currency of choice for most investors. Despite the continuing downtrend in important economic sectors, such as housing – which has dropped consecutively for months now – the U.S. economy remains the king which many believe must be saved in order to rescue the entire system. As such, we see large investors bailing out of other currencies and shoring up their positions within the USD regardless of fundamental data.

This week will no doubt see high volatility in USD pairs as the U.S. economy is set to receive one of its busiest news weeks. On top of all of the information regarding Barack Obama’s economic stimulus package being released, we also have a number of significant indicators coming out this week. Of primary importance is the first meeting for the Federal Reserve Board in 2009; they will be discussing the possibility of cutting the Federal Funds Rate even lower than its present target rate.

Moreover, two important pieces of information regarding the U.S. housing sector will be released Monday and Thursday. We also have the Advanced GDP report for the 4th quarter of 2008 coming out this Friday. Forex traders should mark these events in their calendars as they will no doubt generate exceedingly high volatility in the market, especially surrounding USD pairs and crosses.

President-elect Barack Obama is set to take office as America’s next president on January 20, 2009. Surrounding his inauguration in 2 weeks there seems to be a large amount of optimism as he unveils his ambitions for America’s future. This comes about as the outgoing U.S. President, George W. Bush, has become increasingly unpopular. 
 
Obama has raised many people’s hopes since his landslide election victory 2 months ago, as he unveiled one of the largest stimulus plans in U.S. history. He plans to spend nearly $800 billion over a 2 year period in order to create millions of new jobs and stimulate the U.S. out of recession.
 
On one hand, leaders in Europe and the around the world are optimistic as they see that Obama’s approach to economics and politics is closer to theirs than Bush’s. On the other hand, Obama’s reforms can only be judged as economic events unfold throughout his presidency.
 
The recent economic stimulus program that has been predominantly injected into banks has temporarily stabilized the Dollar and helped lead to rallies in the U.S. stock market. However, Obama will need to be more creative than Bush, because only a social revolution like Franklin Roosevelt’s may restore America as the undisputed economic superpower.
 
Obama continues his rhetoric that things will get worse before they get better. The question therefore is can Obama shorten the recession and help the U.S. economy rebound by the 3rd quarter of 2009?

Recently, the Department of Labor released the US Producer Price Index, showing that there was a steep drop of inflation during the month of October, as the indicator posted a 2.8% decline in prices; almost a full basis point below analysts’ forecasts. The price drops can be attributed to falling energy prices, gasoline prices, and food prices. The reduction in prices was the larges seen in the history of the index.

As a part of the report, core producer prices, which exclude the volatile energy and food prices rose 0.4%.

The PPI is a Fed favorite for measuring inflation. We can now assume that inflationary concerns have all but vanished in the U.S. economy, possibly setting the stage for further interest rate easing by the Fed.

But markets may have another reason to worry. The combination of continually falling prices and negative returns in equity markets may lead to deflation. A general drop in prices can intensify the global economic downturn. If consumers and businesses estimate prices may continue to decline, they may delay purchases of large ticket items.

Solving the problem of deflation can be a much more difficult task then when dealing with it inflation. To alleviate the pressures of rising prices, the Federal Reserve must raise interest rates, slowing economic expansion until a prices fall. With deflation, interest rates must be cut to stimulate economic growth and force a rise in wages.

Currently the Fed Funds Rate stands at a low of 0.25%. This leaves the Fed very little room to maneuver interest rates in order to raise price levels. Until an economic recovery ensues, the danger of deflation may remain.

FOREXYARD Maintains fixed spreads during normal market conditions.

Trade Size
All trades through the FOREXYARD trading platform are executed in standard sizes of 10,000 base currency per one lot. However, the maximum allowed trading volume is $5,000,000.
Here are some examples of a one unit trade size:
U.S. Dollar/Japanese Yen (10,000 U.S. Dollars)
Euro/U.S. Dollar (10,000 Euros)
Euro/Great Britain Pound (10,000 Euros)
Euro/Japanese Yen (10,000 Euros)
Smaller trade sizes are available via the FOREXYARD SuperMini account. Learn more through our website: www.forexyard.com, or through this blog.

Margin
FOREXYARD enables currency trading to be conducted on a highly leveraged basis. Every trader is able to select the degree of leverage or gearing that the trader wishes to employ in trading. Unless the trader specifies otherwise, FOREXYARD sets the leverage levels to FOREXYARD’s default margin level. The leverage may be changed from time to time at the sole discretion of the dealing desk, based on market conditions.

1:200 Leverage
Clients must have approximately 1/2% of the value of the positions they hold in their account for each lot of currency being traded (approximately 200:1 leverage). This amount does not change after 5:00 pm New York time, which is the rollover cut off, but stays constant at approximately 1/2% per lot the entire day and overnight.

Margin Watcher
There is also an important safety feature embedded in this system that prevents clients from losing more money than they have in the account. Should the account equity – meaning the total floating value of the account – fall below the margin requirement of approximately 20% of the used margin, the dealing desk will close all positions. This protects the trader from losing more than the funds deposited into the trading account.

Rollover / Interest Policy
At 5:00 pm New York time, funds are subtracted or added to accounts with open positions because of the automatic rollover.
Note: On Wednesdays, the amount added or subtracted to an account as a result of rolling over a position tends to be around three times the usual amount. This “3-Day” rollover accounts for settlement of trades through the weekend period.
Why does Rollover take place? In the spot forex market, trades must be settled in two business days. If a trader sells 100,000 Euros on Tuesday, the trader must deliver 100,000 Euros on Thursday, unless the position is rolled over. As a service to our traders, FOREXYARD automatically rolls over all open positions to the next settlement date at 5:00 pm New York time. Rollover involves exchanging the position being held for a position expiring the following settlement date. The positions being exchanged are usually not valued at the same price. The amount of the difference varies greatly based on the currency pair, the interest rate differential between the two currencies, and fluctuates day to day with the movement of prices.

Types of Orders
The trading platform provides sophisticated order entry and tracking of market orders, entry orders, stop/limit entry orders, stop-loss orders and trailing-stops orders. All of the above orders are Good Until Cancelled (GTC), which is valid until the order is executed or cancelled.

Margin: Managing your Risk in the FX Market
By trading on margin, traders have the ability control positions much larger than their deposit. The margin deposit for leverage is not a down payment on a purchase of equity, as many perceive margins to be in the stock market. Rather, the margin is a performance bond, or good-faith deposit, to ensure against trading losses. This is very useful to short-term day traders who need the enhancement in capital to generate quick returns. Traders should be aware that leverage is a double-edged sword. Without proper risk management, this high degree of leverage can lead to large losses as well as gains. If the equity in your account drops below the margin required to maintain your open positions, the dealing desk will close all open positions. This guarantees limited risk. Once your used margin reaches 20% of the equity, a margin call will lead to all open positions being closed by the dealing desk. To learn more about the margin watcher feature please contact the FOREXYARD staff, which is available 24-hours a day to walk you through the trading station.

ForexYard enables you to trade with amounts as small as $100! Starting to trade with such small amounts is the best way to get acquainted with the Forex marketplace. After familiarizing yourself with the ForexYard system and establishing a trading strategy, you may increase the level and scope of your activity, as you see fit.

There is NO MAXIMUM trade volume on the ForexYard Super-Mini Account. Although the standard trade size is 1,000 units, you are not limited to trading just one lot! For instance, you can trade 10,000 units, 50,000 units or 150,000 units. This means as you become more seasoned and build up confidence, you can slowly increase the size of your positions to maximize profits. In fact, the trade size of 10,000 units allows for more flexibility in terms of customizing the size of your trade enabling better risk management.

ForexYard recommends that all traders with account balances less than $1,000 trade using a Super-Mini Account. This gives you more staying power in the market and the ability to take advantage of multiple opportunities without over-leveraging your account. If you over-leverage your account, you will not give yourself enough room for error. Even if you are correct on the direction of the market, minor fluctuations can generate a margin call and liquidate a good position.

Of course, Forex traders are more than welcome to begin with a Standard Account.

The minimum funds required to deposit in order to open a Standard Account are $1,000, and will allow traders certain benefits like commodities trading.

The ForexYard Super-Mini Account was designed for those who are new to the Forex market. Trades through the Super-Mini Account are in smaller contract sizes of 1,000 units, 1/10th the size of the Standard Account. The smaller trade size gives our clients the opportunity to trade live with less overall risk, or exposure, to the market. In addition, the Super-Mini Account allows traders to become familiar with ForexYard, more specifically the quality and reliability of ForexYard dealing practices and the stability of the Forex Trading Platform.

Instant Deposit with Credit Card
ForexYard allows customers to fund their account with their credit card, so they can start trading immediately. ForexYard cares about protecting your credit card security as well as protecting your privacy to the highest standards. To achieve this, we use the latest technologies and comply with all relevant regulations. Please read our terms & conditions.

Start Trading in Minutes
With ForexYard you can start trading in minutes. Choosing our JAVA-based trading platform means that there is no software to download and you have the option to use your credit card in order to fund your account (depositing the margin required for the trading). Please note that due to security measures, the scope of deals on the first week of new users trading with ForexYard is limited. Such restrictions will be removed after making a phone contact with our team.

Establish Margin Trading Account with as Little as $100
ForexYard enables you to trade with amounts as small as $100! Starting to trade with such small amounts is the best way to get acquainted with the Forex marketplace. After familiarizing yourself with the ForexYard system and establishing a trading strategy you may increase the level and scope of your activity as you see fit.

No Software Download Needed
When you choose the ForexYard JAVA-based trading platform you have no software to download as it enables users to start trading immediately upon receiving a username and password. And with no software download required, you may log into your account and trade anytime, anywhere!

Develop a Disciplined Trading Strategy
Ask any successful trader and they will tell you that the key to trading success is discipline. Everyone has heard the expression “cut your losses and let your profits run” yet how many traders actually practice this?

Many traders will hold on to losses hoping they will reverse eventually, only to see the loss get progressively larger. These “irrational” trading decisions are based on emotional reactions to fluctuating profits and losses, a common pitfall for new traders.

Losses CAN and WILL occur, a trader’s ability to limit his losses is just as important (or even more important) than determining entry points.

Because the pip value on the Super-Mini Account is just 10 cents ($0.10) per pip, traders can focus on developing a disciplined trading strategy, basing their decisions on pip movement and market conditions instead of on profits and losses.

Consider the Following Example:
When trading on a ForexYard Super-Mini Account, a 30 pip floating loss over a $1,000 position is approximately $3. That same 30 pip move against you on the $100,000 position, becomes a $300 floating loss. By starting with a Super-Mini Account a trader loses only a small amount on every losing transaction making it easier to stick to a disciplined trading strategy. Generating larger losses on the Standard Account can be detrimental to new traders as the temptation to hold on to the loss is much greater based on the size of the loss.

Start Small. Build Up Confidence
There is NO MAXIMUM trade volume on the ForexYard Super-Mini Account. Although the standard trade size is 1,000 units, you are not limited to trading one lot! For instance, you can trade 10,000 units, 50,000 units or 150,000 units. This means as you become more seasoned and build up confidence you can slowly increase the size of your positions to maximize profits. In fact, the trade size of 10,000 units allows for more flexibility in terms of customizing the size of your trade enabling better risk management.

The Super-Mini Account is ideal for accounts under $1,000

ForexYard recommends that all traders with account balances less than $1,000 trade using a Super-Mini Account. This gives you more staying power in the market, and the ability to take advantage of multiple opportunities without over-leveraging your account. If you over-leverage your account you will not give yourself room for error. Even if you are correct on the direction of the market, minor fluctuations can generate a margin call and liquidate a good position.

The Currencies Exchange Rate has many names. For example the “foreign exchange rate”- Forex rate FX rate and so on. Ultimately, no matter what name it goes under, the Currencies Exchange Rate refers to one thing: the exchange rate between two currencies.
You have probably asked yourself many questions about the Currencies Exchange Rate. How do I read a Currencies Exchange Rate quotation? Which is the Base currency and which is the Term currency? Why the Currencies Exchange Rate fluctuates? We will answer these questions for you in the following paragraphs.
How do I read a Currencies Exchange Rate quotation? The quotation is given by stating the number of units of “term currency” or “price currency” that can be bought in terms of 1 unit “base currency”. That is in a quotation that reads EUR/USD 1.5 (i.e. 1.5 USD per EUR), the “term currency” is USD and the “base currency” is EUR.
Which is the Base currency and which is the Term currency? To determine this there is a market convention. The order is: EUR > GBP > AUD > USD. Thus if you are converting from EUR into AUD, EUR is the Base currency, AUD is the Term currency. This exchange rate tells you how many Australian dollars you would pay or receive for 1 Euro. There are some exceptions to this rule; one example is in Japan, which always quotes its currency as the base to other currencies.
Why the Currencies Exchange Rate fluctuates? The exchange rate is market based and prices will change whenever the values of either one of the two component currencies change. More importantly a currency will appreciate whenever demand for it will increase beyond available supply.

To access ForexYard’s market analysis center, click here.

Forex, FX, or Foreign Exchange, is the simultaneous exchange of one country’s currency for that of another. FOREXYARD offers a leading online trading platform for individuals that desire to profit from the exchange rate between two currencies. To accomplish this inventors buy or sell one currency for another, with the hope of profiting when the value of the currencies changes their favor as a result of local events around the globe. The Forex Exchange has more daily volume – total transactions- than any other market in the world.
In the FX market you can buy or sell different currencies. When you buy a currency, you are said to be going “long”. And when you sell a currency, you are said to be going “short”. As the value of one currency rises or falls relative to it complementary, traders decide to buy or sell currency pairs in order to gain a profit. Placing a trade in the foreign exchange market is simple and the mechanics of a trade are virtually identical to those found in other public markets.

For more information about opening an account with FOREXYARD, click here.