US Dollar (Part I)

By Ahmad Hassam

It is important for the currency traders to have a good grasp of the general economic characteristics of the most commonly traded currencies. US Dollar is the most heavily traded currency in the global economy.

You should know as a trader what moves the currencies particularly the pairs that you are interested in trading. Traders need to also know the difference between the expected and the actual data. Some currencies tend to track commodity prices while others may move in complete contrast.

The correlation between the currency markets and news is very important. News or data that is in line with the expectations has less of an impact on currency movements than unexpected news or data. Therefore short term traders need to closely monitor the expectation of the currency markets.

US GDP is approximately five times the size of Germany, three times the size of Japan and seven times the size of UK. United States is the worlds leading economy. The US economy is now a service oriented economy with almost 80% of GDP coming from real estate, finance, health care, transportation and business services.

United States has the worlds most liquid and deep equity and fixed income markets in the world. The manufacturing sector is still formidable and US Dollar is particularly sensitive to the development within the sector.

Foreign Direct Investments (FDI) into the US is equal to almost 40% of the total net inflows for United States. Investors from all over the world purchase US assets due to their liquidity and safety. The import and export volume of US also dwarfs the countries. This maybe due to the sheer size of US as true import and export represent only 12% of the GDP.

United States is running a large CA deficit for more than a decade now. US economy is facing the paradox of the twin deficits. One is the Budget Deficit and the other is the Current Account (CA) deficit.

The large CA deficit makes the US Dollar highly sensitive to changes in the capital flows. US need to attract a few billion dollars of capital inflows daily in order to prevent the decline in the value of US Dollar.

United States is a member of the World Trade Organization (WTO). This means that United States is heavily committed to the free trade idea. A weaker US Dollar will help boost US exports whereas a stronger US Dollar makes the US exports expensive and US imports cheap. US trade is equal to roughly 20% of the world trade. United States is the trading partner of many countries across the globe.

Leading export markets for United States are: Canada, Mexico, Japan, EU and UK. Leading import sources for United States are: Canada, China, Mexico, Japan and EU. The growth and political stability in countries that are leading export markets for US are important. For example, should Canada growth slow; its demand for US exports will fall that will have a ripple effect on US growth. - 23210

About the Author:

Mr. Ahmad Hassam is a Harvard University Graduate. He is interested in day trading stocks and currencies. Try Strignano's Forex Signals free. Discover a revolutionary Forex Robot Trading System!

Investors Await Confidence Boost

By Jennifer McClelland

The United States is coming into a much wanted financial upturn. The worst of the recession is finished. Regrettably, the financial frame of mind deteriorated last week as investors began to question whether the fresh perk up was early. They were in addition warned about British government debt which raised concerns regarding how much capital the U.S. government owes, assorted with the longstanding concern that we are borrowing entirely too much money from China and other countries.

Since stocks rallied, starting in early March, investors were able to discover signs of optimism in information that showed a still stressed financial system. As the recovery is falling, investors are pretty anxious going into this trading week, that will see through to two reports on April house sales and the latest assessment of consumer confidence. Unite that with a potential June 1 Chapter 11 bankruptcy filing by General Motors, and you have investors all over the country ?sitting on pins and needles?.

What is scaring investors at present is the sum of out of work numbers that are still rising. What investors don't comprehend is that there are two forms of economic indicators: leading and falling behind. Leading indicators are economic events that forecast an upward moving economy. Lagging indicators are economic actions that react gradually to economic changes, therefore leaving no prophetic worth. Unemployed statistics are a lagging marker due to the detail that jobs are not produced by most corporations until funds are obtained or accounted for that prop them.

Jobless figures are not going to go up until all the leading indicators, which are very strong right now, show themselves in the way of hard economic revival. Economic revival can and will not occur speedily since a robust upturn occurs gradually as a firm establishment is formed under each step. The economy will hesitate a little with each pick up followed by a small turn down as that slow recovery has solidarity formed underneath it. You are also certain to see a few more under pressure companies, particularly in the financial market, hit Chapter 7 insolvency, shut down, and be purchased by stronger businesses. When that occurs, there is nowhere to go but up because there are fewer puny businesses to hold back and weaken the rally.

Chief leading indicators ended out with an improvement last week. The Dow Jones industrial average increased 0.1 %, at the same time as the Standard & Poor?s 500 index finished the week up 0.47 percent. The first test of capacity to erect on these gains occurs Tuesday, at which time the Conference Board releases its May consumer confidence index which should provide some insight into consumers? enthusiasm to expend. Ron Weiner, head and chief executive of RDM Financial in Westport, Conn., says that while any optimistic information about consumers is appreciated, the market is probably to have just a short-range upward movement. ?We want the consumer to be out there, we need them to spend,? Weiner said. ?For the majority, however, we don?t observe patrons going to pull us out of this market because they are also paying down debt at the same time.? Investors are also concerned about retail due to the Commerce Department?s unsatisfactory retail sales information for April, which took the marketplace by revelation May 13 and sent stocks dropping.

Analysts say further stabilization in the lodging business is necessary for a upturn to occur. A government report is also due this week on U.S. home prices during the first quarter of 2009. The housing data could be a big force in shaping investors? attitudes. A housing rally is vital to helping increase consumer confidence and to let banks to set aside some reservations regarding eroding asset principles. - 23210

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Find out more regarding economic indicators and acquire some Investing Advice while you're there.

Position Trading Explained (Part I)

By Ahmad Hassam

Position trading is all about taking a directional market position and holding it as long as the trade makes sense from the trend standpoint. This means that positions are held for longer term. Now there are four style of trading: Scalping, Day Trading, Swing Trading and Position Trading.

In the fast moving world of forex trading, position trading may mean keeping a trade open from one week to a month to as long as a year or possibly more. Most individual and retail traders do not have the patience for position trading.

Only those position traders who have the patience to stick with the trend and let their profits run are generally able to capitalize on these longer term price moves. This is somewhat unfortunate as most retail traders dont have that patience. Position trading can be one of the most profitable styles of trading due to the fact that many currencies tend to trend well on long term basis.

Position trading due to its long term time frame tends to rely heavily on fundamental analysis along with longer term technical analysis. This is unlike day trading or swing trading that relies almost exclusively on technical analysis due to the short time frames.

Fundamental analysis is geared towards longer term price forecasts rather than swing to swing movements that are primarily the focus of technical analysis. Fundamental analysis concerns itself with the economic forces that drive the major market movements.

The general direction of change in the currency value over the long run is what interests the position traders. The economic forces that determine the long term trend of a currency include interest rates, inflation, GDP, unemployment and help to determine the value of the national currency overtime.

Trading with the trend is what the trend traders do. Position trading and trend trading both follow almost similar approaches. However, position traders often rely on fundamentals along with the technicals; trend traders are almost exclusively technical in nature.

As carry traders hold interest positive positions to benefit from both regular interest payments and exchange rate profits, carry trading can be considered a form of position trading. How do position traders decide which position to take?

Forex position traders weigh strength and weaknesses in currencies by taking various fundamental and technical factors into account. They then establish positions on currency pairs according to their views.

Lets suppose that a position trader performs fundamental analysis on economic conditions surrounding the major currencies and is of the view that the US Dollar is indicating fundamental weakness going forward.

The position trader thinks that the Euro is showing significant fundamental strength at the same time that the US Dollar is showing weakness going forward. This opinion may have been based on the recent rate of economic growth, comments by the Federal Reserve Board (FED) Chairman or the President of European Central Bank (ECB), the state of ongoing recession, on the state of inflationary/deflationary pressure in the economy and so on. - 23210

About the Author:

Mr. Ahmad Hassam is a Harvard University Graduate. He is interested in day trading stocks and currencies. Try Strignano's Forex Signals free. Discover a revolutionary Forex Robot Trading System!

US Dollar (Part II)

By Ahmad Hassam

The Federal Reserve Board (FED) is responsible for making the monetary policy of United States. FED sets and implements the monetary policy through its Federal Open Market Committee (FOMC). The voting members of FOMC are the seven governors of FED plus five presidents of the district reserve banks. Eight meeting of FOMC are held every year. These meetings are widely watched by the analyst for interest rate announcements and changes in growth expectations.

FED has the mandate for long run price stability and sustainable economic growth. FED has a high degree of independence in setting the monetary policy. FED uses the monetary policy to control inflation, unemployment and balanced growth. The most important tool used by FED is its Open Market Operations.

Monetary policy uses control of interest rate to increase or decrease the money supply in the economy to achieve its growth objective. FED controls the short term interest rate through its open market operations. It involves FEDs sale or purchase of government securities that includes treasury bills, notes and bonds. Increase in FEDs purchases lowers the interest rates while selling of these securities raises the interest rate.

Federal Fund Rate is the key policy target of the FED. It is the interest rate at which the banks lend overnight to one another in the overnight interbank market. The primary interest rate that is affected by these operations is the Federal Fund Rate. The market then adjusts the other short term and long term interest rates accordingly. FED does not directly sets the Federal Fund Rate. It establishes a target rate through the open market operations.

The US fiscal policy is in the control of US Treasury. Fiscal policy means the amount of taxes and government spending for a given year. In fact it is the US Treasury that actually determines the US Dollar policy.

For example, if the US Treasury feels that the US Dollar is under or overvalued, US Treasury can give instructions to the New York Federal Reserve Board to intervene in the forex markets by actually buying or selling US Dollars. Therefore, you should always try to watch the US Treasury views as changes to that view is very important for the currency markets.

Over 90% of all currency deals involve the US Dollar. The heavily traded currency pairs in the global currency markets are EUR/USD, USD/JPY, GBP/USD and USD/CHF. These currency pairs represent the most frequently traded currency pairs in the global markets. As you can see, all these currency pairs involve US Dollar on either side of the pair. So the most important economic data for the global currency markets is the US Dollar fundamentals.

The relationship between Gold and US Dollar is very important for you to understand. There is an almost perfect negative correlation between the US Dollar and the gold prices. The US Dollar moves in opposite direction to the gold. This inverse relationship stems from the fact that gold is measured in US Dollars.

Gold is commonly viewed as the ultimate safe haven commodity by the investors all over the globe. When US Dollar depreciates due to global economic uncertainty like the present, gold appreciates. You must know that the gold prices are going up right now. - 23210

About the Author:

Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in day trading stocks and currencies. Try Strignano's Forex Signals free. Discover a revolutionary Forex Robot Trading System!

Currency Day Trading - What Do I Need To Know?

By Sebastian Thompson

A investor purchasing & selling foreign exchange in the same day is recognized as performing currency day trading. This stems from the fact that the proceedings are all done in the same day and the investor is not concerned about what occurs the next day. Previously this type of foreign exchange line of work could only be indulged in by big companies & fiscal establishments however nowadays anyone can do currency day trading.

Currency day trading uses debt leverage to grant the traders access to much larger rewards or losses than his first stake, which establishes forex as a really attractive pastime to individuals trading from home. Paid day traders can operate from home or they can work for big establishments like investment banks, the deviation being the sum of research and resources available to them.

Being a success in currency day trading usually means having invested time becoming an expert on particular specific currency couples, which requires a lot of time to master. Making money in this sort of business sector is mostly grounded upon experience as one must be able to time the proper entry and exit positions from the deal perfectly.

The basis of currency day trading is rooted in sets of analysis which dictate how and when a trader will commit his transactions in a currency with the aim of making a profit in the twenty-four hour period. A lot of research time and money goes into growing a currency day trading system which will spit out signals. These are founded upon either the fundamental principles method which uses up-to-date intelligence from round the world or the technical analysis method which is dependent upon charts.

The most recent additions to these systems have been the release of currency day trading systems that claim to run a foreign exchange trading business altogether autonomously. The foundation of this is that someone has programmed into the computer software all the knowledge they have gained about graph signals and when to trade. Mental factors of losing money or trying to maximise a profit are taken out of the equation with this method, as the software program does not have the same issues and chugs along.

However there is unlikely to ever be a currency day trading system which consistently makes a lot of money and no losses as the owner of would be very unlikely to want to sell or share his system.

As with all trading you should make yourself aware of the risk factors involved with currency day trading. If you're starting out you will incur losses which you will have to accept as part of the learning process and be prepared to accept the fact that there is no substitute for learning how to trade yourself and not relying entirely on any one system. - 23210

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To make certain you get the real lowdown then try to absorb as much as possible on currency day trading and broaden your knowledge with a currency trading course