US Nonfarm Payrolls and Unemployment Rate surprise to the upside. JPY disappears over a cliff.

arket seems to be tiring of weak USD theme, as the USD initially storms higher despite equity rally and bond sell-off.

MAJOR HEADLINES – PREVIOUS SESSION

* Australia Jul. AiG Performance of Construction Index out at 39.5 vs. 42.6 expected
* Switzerland Jul. Unemployment Rate out at 3.9% as expected and vs. 3.8% in Jun.
* Germany Jun. Trade Balance out at 12.2B vs. 10.6B expected and 9.5B in May
* Norway Jun. Industrial Product Manufacturing out at -1.4% MoM vs. -0.8% expected
* UK Jul. PPI Input/Output out at -1.4%/+0.3% MoM vs. -0.8%/0.0% expected, respectively
* Germany Jun. Industrial Production out at -0.1% MoM vs. +0.5% expected
* Canada Jul. Unemployment Rate steady at 8.6% vs. 8.8% expected
* Canada Jul. Net Change in Employment fell -44.5k vs. -15.0k expected and -7.4k in Jun.
* US Jul. Change in Nonfarm Payrolls out at -247k vs. -325k expected
* US Jul. Unemployment Rate falls to 9.4% vs. 9.6% expected and 9.5% in Jun.
* US Jul. Average Hourly Earnings rose 0.2% MoM vs. 0.1% expected
* US Jul. Average Weekly Hours rose to 33.1 vs. 33.0 expected and 33.0 in Jun.
* Canada Jul. Ivey PMI out at 51.8 vs. 54.0 expected and 58.2 in Jun.


THEMES TO WATCH – UPCOMING SESSION

(All times GMT)

* US Jun. Consumer Credit (1900)
* New Zealand Jul. QV House Prices (Sun 1200)
* Japan Jun. Current Account (Sun 2350)
* Australia Jun. Home Loans (Mon 0130)
* China Jul. Producer/Purchasing Price Index (Mon 0200)
* China Jul. Consumer Price Index (Mon 0200)
* Japan Jul. Machine Tool Orders (Mon 0600)

Market Comments:

The positive US employment report touched off very unambiguous reactions in equity and bond markets, but the FX reaction has been a real circus. The very first reaction saw the normal reaction of the USD weakening on good economic news, but within a few minutes, the action reversed to USD strength - and then back to weakness and now back to strength as we are writing this a few minutes before the US open. This suggests the market is really struggling to get a grip on what it wants to believe at the moment and whether good US economic news will ever be a reason to buy the greenback. Clearly it shows some caution in playing the . Less caution was shown in the JPY crosses as the bottom dropping out of the bond market sent an unambiguous sell JPY signal. This probably caught a complacent USDJPY market by surprise, judging from the aggravated upside there.

A bit more on the US employment report: seasonal adjustments brought about a fall in the unemployment rate (with 5 of the 6 statistical flavors of unemployment showing a actually showing a rise before adjustment), but there are a number of factors that suggest we need to wait for the September to January time frame to know for sure if we are out of the woods with this employment crisis, as that is the season when the biggest headcount reductions usually take place, if they are going to. For the short term here, the market is uncorking another bottle of Green Shoots champagne, and equities are higher, bonds are lower and the USD is mixed.

It would seem to us that perfection is already largely priced in here for many risk assets and the big risk is that end demand will not coming storming back even if the US job market is stabilizing (and we have reason to believe that it may worsen further in the fall/winter time frame). We doubt whether the market will be able to celebrate this employment report beyond the very shortest term.

Another note about the payrolls: the US has the smallest Nonfarm Payrolls number for a July print (non statistically manipulated) since 2000, when the population of the US Was about 8% smaller than it is now…..

Of most interesting going forward into next week is 1)whether the USD can follow through on its rally today if the world remains in risk willing mode. This has not happened in ages, but the greenback is putting up a fight today. 2)whether today proves the climax in the risk rally (in which case, we would certainly expect the US rally to follow through). One of the key indicators we will be watching today and in the coming week is the US bond market, where the 10-year benchmark yield has crossed above key resistance at 3.75%. That benchmark rallied to 4% at the most recent inflation scare back in June. This rise of rates will be an interesting set up to next Wednesday's FOMC meeting.

The action in the Aussie has been rather uninspiring since yesterday, considering the strength of risk appetite here and the RBA mentioning overnight that the next rate move may be an increase.

Chart: USDJPY
USDJPY exploded through resistance on the US employment report after inconclusive ranging over the last couple of weeks. The move will need a continued sell-off in bonds in coming sessions to maintain support and drive it through the Ichimoku cloud to higher levels.

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Producer Price Index

The Producer Price Index (PPI) is a measure of the average level of prices of a fixed basket of goods received in primary markets by producers. The monthly PPI reports are widely followed as an indication of commodity inflation.

The PPI is considered important because it accounts for price changes throughout the manufacturing sector.

The PPI is often followed but excludes the food and energy components as these items are normally much more volatile than the rest of the PPI and can therefore obscure the more important underlying trend.

Studying the PPI allows consideration of inflationary pressures that may be accumulating or receding, but have not yet filtered through to the finished goods prices.

A rising PPI is normally expected to lead to higher consumer price inflation and thereby to potentially higher short-term interest rates. Higher rates will often have a short term positive impact on a currency, although significant inflationary pressure will often lead to an undermining of the confidence in the currency involved.

Payroll Employment

Payroll employment is a measure of the number of people being paid as employees by non-farm business establishments and units of government. Monthly changes in payroll employment reflect the net number of new jobs created or lost during the month and changes are widely followed as an important indicator of economic activity.

Payroll employment is one of the primary monthly indicators of aggregate economic activity because it encompasses every major sector of the economy. It is also useful to examine trends in job creation in several industry categories because the aggregate data can mask significant deviations in underlying industry trends.

Large increases in payroll employment are seen as signs of strong economic activity that could eventually lead to higher interest rates that are supportive of the currency at least in the short term. If, however, inflationary pressures are seen as building, this may undermine the longer term confidence in the currency.

Durable Goods Orders

Durable Goods Orders are a measure of the new orders placed with domestic manufacturers for immediate and future delivery of factory hard goods. Monthly percent changes reflect the rate of change of such orders.

Levels of, and changes in, durable goods order are widely followed as an indicator of factory sector momentum.

Durable Goods Orders are a major indicator of manufacturing sector trends because most industrial production is done to order. Often, the indicator is followed but excludes Defence and Transportation orders because these are generally much more volatile than the rest of the orders and can obscure the more important underlying trend.

Durable Goods Orders are measured in nominal terms and therefore include the effects of inflation. Therefore the Durable Goods Orders should be compared to the trend growth rate in PPI to arrive at the real, inflation-adjusted Durable Goods Orders.

Rising Durable Goods Orders are normally associated with stronger economic activity and can therefore lead to higher short-term interest rates that are often supportive to a currency at least in the short term.

Retail Sales

Retail Sales are a measure of the total receipts of retail stores. Monthly percentage changes reflect the rate of change of such sales and are widely followed as an indicator of consumer spending.

Retails Sales are a major indicator of consumer spending because they account for nearly one-half of total consumer spending and approximately one-third of aggregate economic activity.

Often, Retail Sales are followed less auto sales because these are generally much more volatile than the rest of the Retail Sales and can therefore obscure the more important underlying trend.

Retail Sales are measured in nominal terms and therefore include the effects of inflation. Rising Retail Sales are often associated with a strong economy and therefore an expectation of higher short-term interest rates that are often supportive to a currency at least in the short term.

Housing Starts

Housing Starts are a measure of the number of residential units on which construction is begun each month and the level of housing starts is widely followed as an indicator of residential construction activity.

The indicator is followed to assess the commitment of builders to new construction activity. High construction activity is usually associated with increased economic activity and confidence, and is therefore considered a harbinger of higher short-term interest rates that can be supportive of the involved currency at least in the short term.

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Consumer Price Index

The Consumer Price Index (CPI) is a measure of the average level of prices of a fixed basket of goods and services purchased by consumers. The monthly reported changes in CPI are widely followed as an inflation indicator.

The CPI is a primary inflation indicator because consumer spending accounts for nearly two-thirds of economic activity. Often, the CPI is followed but excludes the price of food and energy as these items are generally much more volatile than the rest of the CPI and can obscure the more important underlying trend.

Rising consumer price inflation is normally associated with the expectation of higher short term interest rates and may therefore be supportive for a currency in the short term. Nevertheless, a longer term inflation problem will eventually undermine confidence in the currency and weakness will follow.

Working with statistics

Trade Balance

The trade balance is a measure of the difference between imports and exports of tangible goods and services. The level of the trade balance and changes in exports and imports are widely followed by foreign exchange markets.

The trade balance is a major indicator of foreign exchange trends. Seen in isolation, measures of imports and exports are important indicators of overall economic activity in the economy.

It is often of interest to examine the trend growth rates for exports and imports separately. Trends in export activities reflect the competitive position of the country in question, but also the strength of economic activity abroad. Trends in import activity reflect the strength of domestic economic activity.

Typically, a nation that runs a substantial trade balance deficit has a weak currency due to the continued commercial selling of the currency. This can, however, be offset by financial investment flows for extended periods of time.

Gross Domestic Product

The Gross Domestic Product (GDP) is the broadest measure of aggregate economic activity available. Reported quarterly, GDP growth is widely followed as the primary indicator of the strength of economic activity.

GDP represents the total value of a country's production during the period and consists of the purchases of domestically produced goods and services by individuals, businesses, foreigners and the government.

As GDP reports are often subject to substantial quarter-to-quarter volatility and revisions, it is preferable to follow the indicator on a year-to-year basis. It can be valuable to follow the trend rate of growth in each of the major categories of GDP to determine the strengths and weaknesses in the economy.

A high GDP figure is often associated with the expectations of higher interest rates, which is frequently positive, at least in the short term, for the currency involved, unless expectations of increased inflation pressure is concurrently undermining confidence in the currency.

Expert View

David Karsbøl
Manager/Market Strategist, Saxo Bank

David Karsbøl holds a Master of Science degree (Economics) from the University of Copenhagen and has previously been employed as an insurance analyst. Mr Karsbøl works with fundamental analysis and research and contributes to Saxo Bank's strategy products. He also develops and maintains macroeconomic models and a number of trading models, which are designed to profit from co-variations between the Forex and fixed income markets. Mr Karsbøl is regularly appears on major financial news networks and comments several days a week on the financial markets via Saxo Bank's live Market Call webcast. He is a native Danish speaker and is fluent in English.
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Economic calendar for week 31 from 6 Aug. 09 to 7 Aug. 09

Date GMT Release for Period Consensus Prior
6 Aug. 09 05:00 Leading Index CI (Japan ) JUN P - - 76.9
6 Aug. 09 05:00 Coincident Index CI (Japan ) JUN P - - 87.1
6 Aug. 09 05:45 SECO Consumer Climate (Switzerland ) JUL - - -38
6 Aug. 09 06:00 Finland GDP Indicator WD (Finland ) MAY - - -9.20%
6 Aug. 09 07:00 Trade Balance (Koruna) (Czech Republic ) JUN - - 11.7B
6 Aug. 09 07:00 Trade Balance (Mln Euros) (Hungary ) JUN P - - - -
6 Aug. 09 07:00 Industrial Output (YoY) (Hungary ) JUN P - - -22.10%
6 Aug. 09 07:00 Industrial Output (MoM) (Hungary ) JUN P - - 2.60%
6 Aug. 09 07:30 CPI (MoM) (Netherlands ) JUL - - -0.30%
6 Aug. 09 07:30 CPI (YoY) (Netherlands ) JUL - - 1.40%
6 Aug. 09 07:30 CPI - EU Harmonized (MoM) (Netherlands ) JUL - - -0.40%
6 Aug. 09 07:30 CPI - EU Harmonized (YoY) (Netherlands ) JUL - - 1.40%
6 Aug. 09 08:00 Industrial Production sa (MoM) (Italy ) JUN - - 0.00%
6 Aug. 09 08:00 Industrial Production wda(YoY) (Italy ) JUN - - -19.80%
6 Aug. 09 08:00 Industrial Production nsa(YoY) (Italy ) JUN - - -22.60%
6 Aug. 09 09:00 Consumer Price Index MoM (Cocos (Keeling) Islands ) JUL - - -0.10%
6 Aug. 09 09:00 Consumer Price Index YoY (Cocos (Keeling) Islands ) JUL - - 0.20%
6 Aug. 09 09:00 Trade Balance (Iceland ) JUL P - - - -
6 Aug. 09 10:00 Factory Orders MoM (sa) (Germany) JUN - - 4.40%
6 Aug. 09 10:00 Factory Orders YoY (nsa) (Germany) JUN - - -29.40%
6 Aug. 09 11:00 BOE ANNOUNCES RATES (United Kingdom ) aug-06 0.50% 0.50%
6 Aug. 09 11:45 ECB Announces Interest Rates (European Union) aug-06 1.00% 1.00%
6 Aug. 09 12:30 Building Permits MoM (Canada ) JUN 1.00% 14.80%
6 Aug. 09 12:30 Initial Jobless Claims (United States of America ) aug-01 - - - -
6 Aug. 09 12:30 Continuing Claims (United States of America ) jul-25 - - - -
6 Aug. 09 15:00 ICSC Chain Store Sales YoY (United States of America ) JUL - - -5.10%
7 Aug. 09 00:00 Switzerland Holds Federal Bond Auction (Switzerland ) Jul-08
7 Aug. 09 00:00 Eco Watchers Survey: Current (Japan ) JUN - - 36.7
7 Aug. 09 00:00 Eco Watchers Survey: Outlook (Japan ) JUN - - 43.3
7 Aug. 09 00:00 International Reserves (Latvia ) JUL - - 3943.1M
7 Aug. 09 00:00 Official Reserve Assets (Russian Federation ) JUL - - 412.6B
7 Aug. 09 00:00 Consumer Prices (MoM) (Russian Federation ) JUL - - 0.60%
7 Aug. 09 00:00 Money Supply Narrow Def.RUB (Russian Federation ) aug-03 - - - -
7 Aug. 09 00:00 Consumer Prices (YoY) (Russian Federation ) JUL - - 11.90%
7 Aug. 09 00:00 Russia Consumer Prices YtD (Russian Federation ) JUL - - 7.40%
7 Aug. 09 00:00 Consumer Price Index Core MoM (Russian Federation ) JUL - - 0.30%
7 Aug. 09 00:00 Core Inflation Year-to-Date (Russian Federation ) JUL - - 6.00%
7 Aug. 09 00:00 Trade Balance (Euros) (Portugal ) MAY - - -1275
7 Aug. 09 01:00 Westpac Consumer Confidence (Australia ) JUL - - 12.70%
7 Aug. 09 01:30 Home Loans (Australia ) MAY 1.30% 0.90%
7 Aug. 09 01:30 Investment Lending (Australia ) MAY - - 8.90%
7 Aug. 09 01:30 Value of Loans MoM (Australia ) MAY - - 1.90%
7 Aug. 09 04:00 Bankruptcies (YoY) (Japan ) JUN - - -6.70%
7 Aug. 09 05:45 Unemployment Rate (Switzerland ) JUL - - 3.60%
7 Aug. 09 05:45 Unemployment Rate (sa) (Switzerland ) JUL - - 3.80%
7 Aug. 09 06:00 Trade Balance (Germany) JUN - - 9.6B
7 Aug. 09 06:00 Current Account (EURO) (Germany) JUN - - 3.7B
7 Aug. 09 06:00 Imports SA (MoM) (Germany) JUN - - -2.10%
7 Aug. 09 06:00 Exports SA (MoM) (Germany) JUN - - 0.30%
7 Aug. 09 06:00 Consumer Prices (MoM) (Estonia ) JUL - - 0.00%
7 Aug. 09 06:00 Consumer Prices (YoY) (Estonia ) JUL - - -0.90%
7 Aug. 09 06:30 Bank of France Bus. Sentiment (France ) JUN 84 81
7 Aug. 09 06:45 Trade Balance (Euros) (France ) JUN - - -2.7B
7 Aug. 09 07:00 Industrial Output (MoM) (Romania ) JUN - - -0.30%
7 Aug. 09 07:00 Industrial Output (YoY) (Romania ) JUN - - -9.80%
7 Aug. 09 07:00 Retail Sales (MoM) (Romania ) JUN - - 0.20%
7 Aug. 09 07:00 Retail Sales (YoY) (Romania ) JUN - - -12.30%
7 Aug. 09 07:00 Industrial Production wda(YoY) (Somalia ) JUN - - -23.90%
7 Aug. 09 07:00 Construction Constant (YoY) (Somalia ) JUN - - -3.90%
7 Aug. 09 07:30 Wholesale Price Index (MoM) (Austria ) JUL - - 0.90%
7 Aug. 09 07:30 Wholesale Price Index (YoY) (Austria ) JUL - - -10.30%
7 Aug. 09 07:30 Industrial Production sa (MoM) (Netherlands ) JUN - - -0.20%
7 Aug. 09 07:30 Industrial Production nsa (YoY) (Netherlands ) JUN - - -12.70%
7 Aug. 09 07:30 Industrial Sales nsa (YoY) (Netherlands ) JUN - - -27.20%
7 Aug. 09 07:30 Budget Balance (Sweden ) JUL - - -102.7B
7 Aug. 09 07:30 BBVA to Hold Board Meeting in Mexico City (European Union) Jul-08
7 Aug. 09 07:30 Caja Madrid's Blesa, CECA's Quintas Speak in Madrid (European Union) Jul-08
7 Aug. 09 07:30 Industrial Prod. s.a. (MoM) (Sweden ) MAY - - -2.10%
7 Aug. 09 07:30 Industrial Prod. n.s.a. (YoY) (Sweden ) MAY - - -21.20%
7 Aug. 09 07:30 Industrial Orders s.a. (MoM) (Sweden ) MAY - - 0.40%
7 Aug. 09 07:30 Industrial Orders n.s.a. (YoY) (Sweden ) MAY - - -30.00%
7 Aug. 09 07:30 Activity Index Level (Sweden ) MAY - - 102.4
7 Aug. 09 08:00 ECB's Gonzalez-Paramo Speaks in Madrid (European Union) Jul-08
7 Aug. 09 08:00 Mexican Central Bank's Ortiz Speaks in Madrid (European Union) Jul-08
7 Aug. 09 08:00 GDP sa and wda (QoQ) (Italy ) 2Q P - - - -
7 Aug. 09 08:00 GDP sa and wda (YoY) (Italy ) 2Q P - - - -
7 Aug. 09 08:00 Industrial Production SA MoM (Norway ) JUN - - -3.10%
7 Aug. 09 08:00 Industrial Prod. WDAJ YOY (Norway ) JUN - - -7.80%
7 Aug. 09 08:00 Ind Prod Manufacturing SA MoM (Norway ) JUN - - -0.70%
7 Aug. 09 08:00 Ind Prod Manufacture WDAJ YoY (Norway ) JUN - - -9.80%
7 Aug. 09 08:00 International Reserves (USD) (Czech Republic ) JUL - - 38.4B
7 Aug. 09 08:30 PPI Input NSA (MoM) (United Kingdom ) JUL - - 1.50%
7 Aug. 09 08:30 PPI Input NSA (YoY) (United Kingdom ) JUL - - -11.00%
7 Aug. 09 08:30 PPI Output n.s.a. (MoM) (United Kingdom ) JUL - - -0.20%
7 Aug. 09 08:30 PPI Output n.s.a. (YoY) (United Kingdom ) JUL - - -1.20%
7 Aug. 09 08:30 PPI Output Core NSA (MoM) (United Kingdom ) JUL - - -0.80%
7 Aug. 09 08:30 PPI Output Core NSA (YoY) (United Kingdom ) JUL - - 0.10%
7 Aug. 09 08:30 Trade Balance (EUR) (El Salvador ) JUN - - -0.045B
7 Aug. 09 09:00 Euro-Zone GDP s.a. (QoQ) (European Union) 1Q F - - -2.50%
7 Aug. 09 09:00 Euro-Zone GDP s.a. (YoY) (European Union) 1Q F - - -4.80%
7 Aug. 09 09:00 Euro-Zone Household Cons (QoQ) (European Union) 1Q F - - -0.50%
7 Aug. 09 09:00 Euro-Zone Gross Fix Cap (QoQ) (European Union) 1Q F - - -4.20%
7 Aug. 09 09:00 Euro-Zone Govt Expend (QoQ) (European Union) 1Q F - - 0.00%
7 Aug. 09 09:30 BRC June Shop Price Index (United Kingdom ) Jul-08
7 Aug. 09 09:50 ECB's Tumpel-Gugerell Speaks at Event in Frankfurt (European Union) Jul-08
7 Aug. 09 10:00 Industrial Prod. YoY (nsa wda) (Germany) JUN - - -17.90%
7 Aug. 09 10:00 Industrial Production MoM (sa) (Germany) JUN - - 3.70%
7 Aug. 09 10:00 Unemployment Rate (Ireland ) JUL - - 11.90%
7 Aug. 09 10:00 Live Register Monthly Change (Ireland ) JUL - - 11.4K
7 Aug. 09 10:00 Live Register Level SA (000's) (Ireland ) JUL - - 413.5
7 Aug. 09 11:00 Unemployment Rate (Canada ) JUL - - 8.60%
7 Aug. 09 11:00 Net Change in Employment (Canada ) JUL -20.0K -7.4K
7 Aug. 09 11:00 MBA Mortgage Applications (United States of America ) Jul-02 - - -18.90%
7 Aug. 09 12:30 Change in Nonfarm Payrolls (United States of America ) JUL -333K -467K
7 Aug. 09 12:30 Unemployment Rate (United States of America ) JUL 9.60% 9.50%
7 Aug. 09 12:30 Change in Manufact. Payrolls (United States of America ) JUL -100K -136K
7 Aug. 09 12:30 Average Hourly Earnings MoM (United States of America ) JUL 0.10% 0.00%
7 Aug. 09 12:30 Average Hourly Earnings YoY (United States of America ) JUL - - 2.70%
7 Aug. 09 12:30 Average Weekly Hours (United States of America ) JUL 33 33
7 Aug. 09 14:00 Ivey Purchasing Managers Index (Canada ) JUL - - 58.2
7 Aug. 09 16:55 Fed's Evans Speaks in South Bend, Indiana (United States of America ) Jul-08
7 Aug. 09 19:00 Consumer Credit (United States of America ) JUN -$4.2B -$3.2B
7 Aug. 09 22:45 NZ Card Spending (MoM) (New Zealand ) JUN - - 0.9
7 Aug. 09 23:50 Foreign Buying Japan Bonds (Japan ) Jul-03 - - -?666.7B
7 Aug. 09 23:50 Foreign Buying Japan Stocks (Japan ) Jul-03 - - -?195.1B
7 Aug. 09 23:50 Japan Buying Foreign Stocks (Japan ) Jul-03 - - ?150.5B
7 Aug. 09 23:50 Japan Buying Foreign Bonds (Japan ) Jul-03 - -

Forex Trading Basics

The global foreign exchange market is the biggest market in the world. The 3.2 trillion USD daily turnover dwarfs the combined turnover of all the world's stock and bond markets.

There are many reasons for the popularity of foreign exchange trading, but among the most important are the leverage available, the high liquidity 24 hours a day and the very low dealing costs associated with trading.

Of course many commercial organisations participate purely due to the currency exposures created by their import and export activities, but the main part of the turnover is accounted for by financial institutions. Investing in foreign exchange remains predominantly the domain of the big professional players in the market - funds, banks and brokers. Nevertheless, any investor with the necessary knowledge of the market's functions can benefit from the advantages stated above.

In the following article, we would like to introduce you to some of the basic concepts of foreign exchange trading. If you would like any further information, we suggest that you sign up for a FREE Membership on this website, where you will be able to exchange views with other Forex traders and get answers to any questions you might have.

Margin Trading

Foreign exchange is normally traded on margin. A relatively small deposit can control much larger positions in the market. For trading the main currencies, Saxo Bank requires a 1% margin deposit. This means that in order to trade one million dollars, you need to place just USD 10,000 by way of security.

In other words, you will have obtained a gearing of up to 100 times. This means that a change of, say 2%, in the underlying value of your trade will result in a 200% profit or loss on your deposit. See below for specific examples. As you can see, this calls for a very disciplined approach to trading as both profit opportunities and potential risks are very large indeed. Please refer to our page Forex Rates & Conditions for current Spreads, Margins and Conditions.

Base Currency and Variable Currency

When you trade, you will always trade a combination of two currencies. For example, you will buy US dollars and sell euro. Or buy euro and sell Japanese yen, or any other combination of dozens of widely traded currencies. But there is always a long (bought) and a short (sold) side to a trade, which means that you are speculating on the prospect of one of the currencies strengthening in relation to the other.

The trade currency is normally, but not always, the currency with the highest value. When trading US dollars against Singapore dollars, the normal way to trade is buying or selling a fixed amount of US dollars, i.e. USD 1,000,000. When closing the position, the opposite trade is done, again USD 1,000,000. The profit or loss will be apparent in the change of the amount of SGD credited and debited for the two transactions. In other words, your profit or loss will be denominated in SGD, which is known as the price currency. As part of our service, Saxo Bank will automatically exchange your profits and losses into your base currency if you require this.

Dealing Spread, but No Commissions

When trading foreign exchange, you are quoted a dealing spread offering you a buying and a selling level for your trade. Once you accept the offered price and receive confirmation from our dealers, the trade is done. There is no need to call an exchange floor. There are no other time-consuming delays. This is possible due to live streaming prices, which are also a great advantage in times of fast-moving markets: You can see where the market is trading and you know whether your orders are filled or not.

The dealing spread is typically 3-5 points in normal market conditions. This means that you can sell US dollars against the euro at 1.7780 and buy at 1.7785. There are no further costs, commissions or exchange fees.

This ensures that you can get in and out of your trades at very low slippage and many traders are therefore active intra-day traders, given that a typical day in USDEUR presents price swings of 150-200 points.

Spot and forward trading

When you trade foreign exchange you are normally quoted a spot price. This means that if you take no further steps, your trade will be settled after two business days. This ensures that your trades are undertaken subject to supervision by regulatory authorities for your own protection and security. If you are a commercial customer, you may need to convert the currencies for international payments. If you are an investor, you will normally want to swap your trade forward to a later date. This can be undertaken on a daily basis or for a longer period at a time. Often investors will swap their trades forward anywhere from a week or two up to several months depending on the time frame of the investment.

Although a forward trade is for a future date, the position can be closed out at any time - the closing part of the position is then swapped forward to the same future value date.

Interest Rate Differentials

Different currencies pay different interest rates. This is one of the main driving forces behind foreign exchange trends. It is inherently attractive to be a buyer of a currency that pays a high interest rate while being short a currency that has a low interest rate.

Although such interest rate differentials may not appear very large, they are of great significance in a highly leveraged position. For example, the interest rate differential between the US dollar and the Japanese yen has been approximately 5% for several years. In a position that can be supported by a 5% margin deposit, this results in a 100% profit on capital per annum when you buy the US dollar. Of course, an even more important factor normally is the relative value of the currencies, which changed 15% from low to high during 2005 – disregarding the interest rate differential. From a pure interest rate differential viewpoint, you have an advantage of 100% per annum in your favour by being long US dollar and an initial disadvantage of the same size by being short.
Please refer to our page Forex Rates & Conditions for current Spreads, Margins and Conditions!

Such a situation clearly benefits the high interest rate currency and as result, the US dollar was in a strong bull market all through 2005. But it is by no means a certainty that the currency with the higher interest rate will be strongest. If the reason for the high interest rate is runaway inflation, this may undermine confidence in the currency even more than the benefits perceived from the high interest rate.

Stop-loss discipline

As you can see from the description above, there are significant opportunities and risks in foreign exchange markets. Aggressive traders might experience profit/loss swings of 20-30% daily. This calls for strict stop-loss policies in positions that are moving against you.

Fortunately, there are no daily limits on foreign exchange trading and no restrictions on trading hours other than the weekend. This means that there will nearly always be an opportunity to react to moves in the main currency markets and a low risk of getting caught without the opportunity of getting out. Of course, the market can move very fast and a stop-loss order is by no means a guarantee of getting out at the desired level.

But the main risk is really an event over the weekend, where all markets are closed. This happens from time to time as many important political events, such as G7 meetings, are normally scheduled for weekends.

For speculative trading, we always recommend the placement of protective stop-lossorders. With Saxo Bank Internet Trading you can easily place and change such orders while watching market development graphically on your computer screen.

Investors' corner

FOREX RATES

Australian Dollar
68.70

69.70
Canadian Dollar
76.20

77.20
China Yuan
12.00

13.50
Euro
118.00

119.50
Japanese Yen
0.8590

0.8690
Saudi Riyal
21.90

22.20
U.A.E Dirham
22.40

22.60
UK Pound Sterling
138.00

139.50
US Dollar
83.45

83.95

Savings Bank A/c.

earn more about the Normal Interest Bearing Operative Savings Account from TMB.

This is the basic starting point for the urban and rural masses to start developing the habit of savings for a brighter future. It gives the customers the benefit of having the convenience of withdrawing money anytime anywhere as well as get decent interest on the savings at the same time. Further routine payments can be automatically made by giving standing instructions to the bank. Nomination and Power of Attorney facility is also available.

Deposit Interest Rates

TMB has been consistently offering higher rates of interest since the last many years for the benefit of its depositors since its cost of operations are low compared to other banks. The rates are split for different segments to offer the highest rate of interest possible. Apart from the Regular Domestic Deposits, we have special rates for High Value Deposits as well as even higher interest rates for Senior Citizens of India.

8/3/2009 3:20 PM: EUR/$..1.4410 $/JPY..95.30 GBP/$..1.6922 $/CHF..1.0595 AUD/$..0.8412 $/CAD..1.0670 USD Plunges to Multi-Month Lows by Korman Tam

8/3/2009 3:20 PM: EUR/$..1.4410 $/JPY..95.30 GBP/$..1.6922 $/CHF..1.0595 AUD/$..0.8412 $/CAD..1.0670

USD Plunges to Multi-Month Lows by Korman Tam

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The greenback tumbled to fresh multi-month lows against the euro at 1.4443 and the sterling at 1.6934 as traders move to break the major pairs out of recent ranges. With equities extending recent gains and commodities edging higher, the dollar remains under pressure amid a shift toward riskier assets. Optimism over a global economic rebound continues to improve, reinforcing sentiment that the worst of the recession may be over.

The week ahead will provide further insight into state of the US economy, providing fodder for equity market bulls and ultimately sending the dollar to fresh lows. The July manufacturing ISM report surged to its highest level since August 2008 at 48.9 versus 44.8 from June. The employment index rose sharply to 45.6 compared with 40.7 in the previous month.

The key highlights for foreign exchange traders this week will be a barrage of US economic reports, including personal consumption, personal income, pending home sales, durable goods orders and Friday’s key July labor report. The July unemployment rate is expected to climb higher to 9.7% from 9.5% in June. The non-farm payrolls report is seen improving sharply to post a loss of 340k jobs versus 467k jobs shed in June.

This article contains the following sections:

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USD: Breakout or Failure? by Angelo Airaghi [Guest Analyst] 7/27/2009

USD: Breakout or Failure?
by Angelo Airaghi [Guest Analyst]
7/27/2009

The U.S. dollar is at key support lines against major currencies and the short/medium/long term trend remains bearish. However, a breakout failure from current levels could signal a short (medium term) rebound for the green back.

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U.S: Recession is over or not?

During his testimony in front of the house panel last week, president Bernanke confirmed a tentative stabilization for the U.S. economy at these levels, although rates should remain low for the next months as well. In reality, the huge consumer and business debit will require years to be repaid. Private sector spending has fallen to record lows and savings have increased. The average duration of the unemployment rate in the United States is at a record high, while tax incomes have declined sharply for the government agencies. The decrease of spending by the private sector has been only marginally substituted by the various government interventions and the trend should continue in the years to come. Unemployment remains the weakest spot, as jobless claims rose to 554,000 in the week of July 18th from 524,000 the previous week. The housing market is at the contrary designing an interesting bottom, albeit prices are still declining. For the third consecutive month, home sales rose 3.6% in June (+1.3% expected) to 4.84 million. The increase was broad-based with condos rising 14% and single-family homes moving up 2.4%. Unsold home inventories declined instead to 9.4 months from the all-time high of 11.3 months registered in March of 2008. In effect, the worst might be over for the real estate market, if history repeats itself. Since1963 important bottoms occurred every 8/9 years: 1967, 1975, 1983, 1991, 2000, 2008/9 (?).


Angelo Airaghi is a Commodity Trading Advisor, registered with the National Futures Association and the Commodity Futures Trading Commission. He has been an active professional since 1990 working for major international financial companies. In the past 10 years, Angelo Airaghi has been an analyst and commentator for national and international media.

This article contains the following sections:

# U.S: Recession is over or not?

# Europe: Investors still skeptics

# US DOLLAR: on focus

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RBI revises the interest rates on FCNR (B)

Reserve Bank of India has revised the interest rates on FCNR (B) deposits of all maturities contracted effective close of business in India on January 31, 2007 are subject to a ceiling of LIBOR/SWAP rates for the corresponding maturities MINUS 25 basis points (as against should not exceed LIBOR/SWAP rate) prevailing on the last working day of the previous month for relevant maturity and currency.

NASDAQ versus EUR/JPY

he 24-month correlation of -0.78 is attributed by the 54% climb in the NASDAQ during the Nov 98-Nov 2000 period, resulting from the great technology rally and impact of aggressive interest rate cuts by the Federal Reserve (Sep, Oct and Nov 1998). This contrasted with the Euro, which fell 15% in 1999 and 13% in the Jan-Nov period in 2000. Yet this negative correlation was reversed in the ensuing periods of the study as the NASDAQ rally floundered, while the Euro decline flattened. ; This continued to the extent of creating a full reversal of trends, which eventually recreated a negative correlation between the two variables in the 1-month period ending in November 2000.

Forex New's

Find the latest in the world of Foreign Exchange Markets both at TMB, Nationally and Internationally. Get the latest upto date news / report about the forex related information from us. Learn about the interest rate movements as and when they happen right here right now. This can be your one stop forex news point for the latest and upto date news about forex markets.

US Dollar Restricted to Narrow Range - What Could Force a Breakout?

US Dollar Restricted to Narrow Range – What could Force a Breakout?

Fundamental Outlook for US Dollar: Neutral

- US Dollar falls as Goldman Sachs results boost S&P 500
- US Jobless Claims boost hopes that economy may recover
- US Dollar may react to Federal Reserve’s Ben Bernanke Testimony

Impressive rallies in the S&P 500 left the US Dollar lower against all major currencies except the Japanese Yen, but a relative sense of unease across financial markets highlights risks of a major USD bounce. US and European equity indices finished the week anywhere from 6-8.5 percent above their previous close—good for a 2000-3000% annualized rate of return. Early-week moves came on impressive earnings results from Wall Street titan Goldman Sachs and relatively benign economic data. It is easy to claim, however, that recent developments are unlikely to sustain such an impressive rate of returns. A relatively empty week of economic event risk ostensibly limits volatility expectation in the days ahead, but traders should keep a close watch on several key earnings reports and effects on the S&P 500 and US Dollar.

The US currency remains in a wide and choppy range against the Euro and other key currencies, and it may take a fairly significant shift in financial market risk sentiment to break the dollar from its trading channel. Had we known a week ago that the S&P 500 would break to fresh 30-day highs, we may have claimed that the EUR/USD would similarly break to fresh medium-term peaks. Yet forex markets clearly had other things in mind—constraining the heavily-traded currency pair to its two-month wedge formation. Consolidation patterns typically lead to noteworthy breakouts, but a continued downtrend in volatility expectations gives little reason to believe such a break will come in the week ahead. Indeed, the DailyFX 1-week currency volatility currently stands near 12-month lows.

The obvious question remains: What could break the US Dollar from its medium-term trading range? In short, there is no real way to know. Our natural suspicion is that it will take a substantial deterioration or improvement in financial market risk appetite to break the EURUSD below 1.3700 or above 1.4300. The rolling correlation between the EURUSD and US S&P 500 continues to trade near record-highs—emphasizing the US Dollar’s sensitivity to the key risk barometer. Equity markets remain similarly linked to the trajectory in commodity markets; the S&P – Reuters CRB Commodities Index correlation likewise trades near all-time highs. Increasingly clear connections across ostensibly unrelated asset classes underline the risk that a tumble in one will lead to sympathetic moves in another.

It remains critical to monitor the trajectory of key financial market health indicators and their effects on the US Dollar. As we continue to argue, noteworthy deterioration in financial market risk sentiment will likely be the spark to force major US Dollar rallies. Absent the correction, the Euro/US Dollar currency pair may continue to trade in a progressively narrower range. – DR

For more timely FX market analysis, visit our newly-launched Forex Stream Service.

6/19/2009 1:00 PM: EUR/$..1.3970 $/JPY..96.10 GBP/$..1.6485 $/CHF..1.0784 AUD/$..0.8070 $/CAD..1.1328

Dollar Drifts Lower by Korman Tam



The greenback drifted lower against the major currencies in a quiet session to end the week, slipping toward the 1.40-level against the euro and 96-figure versus the yen. US equities were mixed with the Nasdaq edging higher to 15.53-points to 1823.18 while the Dow Jones slipped by 27.73-points to 8,528.25.
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Germany ZEW Buoys EUR

The euro edged up slightly higher against the greenback on better than expected Eurozone data. Germany’s June ZEW sentiment survey unexpectedly surged to 44.8 – its highest level in 3-years, up sharply from 31.1 a month earlier and sharply beating estimates for an increase to 35.0. The current conditions component improved to -89.7 in June versus -92.8 in May. While the surge in ZEW propped the single currency higher, the euro was unable to sustain gains above the 1.40-level.

Greenback Rallies Sharply

he greenback reversed previous session’s losses, rallying sharply against the euro by over two big figures to 1.4111 and the sterling by nearly four big figures at 1.6244. US equities bourses pulled back further with the Dow Jones and Nasdaq sliding by over 1.2%, while the S&P 500 lost over 1.8%.

With markets eagerly anticipating the May US labor report due out on Friday, the May ADP private-sector payrolls were worst-than-expected, posting a loss of 532k jobs and exceeding expectations for a loss of 520k jobs from 491 private sector jobs lost previously. April durable goods orders increased by 1.7%, albeit less than the 1.9% increase from March, while factory orders improved by 0.7% from 0.9%. The May non-manufacturing ISM report improved to 44 versus 43.7 a month earlier, remaining beneath the key 50-level though.

Data slated for release on Thursday include weekly jobless claims, Q1 labor costs and non-farm productivity. The key reports will be released on Friday, consisting of the May unemployment rate, which is seen creeping up to 9.2% and the non-farm payrolls reading, expected reveal a 520k job loss from 539k loss of jobs a month earlier.

Rumors Pound Sterling

The greenback jumped sharply higher against the sterling and euro on rumors circulating earlier in the session over uncertainty over the UK political outlook. The dollar relinquished some of its strength to trade near 1.4180 versus the euro and 1.6190 against the pound.

The key May jobs data is due out tomorrow at 8:30 AM and traders will closely analyze the data to gauge the extent of the deterioration in the labor market. The unemployment rate is seen edging up further to 9.2% from 8.9% a month earlier while the non-farm payrolls are expected to post another loss of 520k jobs from 539k loss lost in April.

If the unemployment report is sharply better than expected, the likely scenario to materialize would be a rally in the US equity bourses, prompting a return to riskier assets which would ultimately be detrimental to the dollar.

USD Rallies Sharply

The greenback received a boost across the board at the start of the week, edging up to 1.3757 against the euro and 1.6245 versus the pound. Prompting the currency’s strength were comments from Russian Finance Minister Kudrin, in which he expressed confidence in the dollar as the global reserve currency of choice and that it would be premature to discuss an alternative. Recall several weeks ago, the dollar came under pressure following a series of comments from both Russian and Chinese government officials calling for a new global currency to replace the greenback given the deteriorating fiscal position.

US equity bourses posted steep losses, with the Dow Jones, Nasdaq and S&P 500 plunging by well over 2%. The economic calendar was largely negative today, with the June NY Fed manufacturing index deteriorating by more than expected to -9.41 versus May at -4.55. The April overall net capital flows revealed a net outflow of $53.2 billion, versus an inflow of $23.2 billion in the month prior. The June NAHB housing market survey missed estimates for an improvement to 17, instead dipping to 15 from 16 in May.

Key data slated for release in the Tuesday session include May PPI, building permits, housing starts, and industrial production. The headline producer price index in May is seen edging up to 0.4%, from 0.3% a month earlier and remain unchanged from the previous year at -3.7%. Core PPI is estimated to hold steady at 0.1% m/m and 3.2% y/y. Traders have continued to focus on housing reports for signs that the housing market has begun to bottom. The May housing starts are expected to improve to 490k units, compared with 458k units a month earlier while building permits are forecasted to edge up to 500k units from 498k units previously.. Meanwhile, May industrial production is seen holding steady from the previous month, posting a 0.5% decline.

Gold hits 3-wk low under $940 as dollar rebounds

LONDON - Gold slid to a three-week low below $940 an ounce in Europe on Friday as the dollar rebounded broadly and oil prices eased.

Most commodities priced in dollars have lost value as the U.S. currency firmed, as they become more expensive for holders of other currencies. Gold’s profile as a hedge against oil-induced inflation also eased with crude prices.

Spot gold stood at $941.35 per ounce at 1432 GMT, against $954.00 an ounce late in New York on Thursday. It earlier hit a low of $936.00, its weakest since May 21, as the dollar extended its gains against several major currencies.

“The dollar is the main driver,” said Societe Generale analyst David Wilson.

“The fact that it has managed to fall out of the bottom of that $940 to $980 range suggests there might be a bit more room to push it on the downside,” he said, adding that the metal was probably due for some retracement after failing to pierce the $1,000 mark last week.

The dollar rose broadly on Friday, rebounding from vicious selling earlier in the week, with the euro pressured after weak industrial output data. Crude oil eased toward $72 a barrel, a day after reaching a near eight-month high, pressured by the dollar’s strength and views that prices have risen too far, too fast.

Gold has historically tracked oil prices, as it is often bought as a hedge against inflationary pressures sparked by higher crude.

In wider markets, European shares dipped, and Wall Street opened lower, extending losses after a report showed a rise in inflation expectations and continuing job uncertainty even as consumer mood improved in June.

Investors also awaited a G8 finance ministers’ meeting later in the day.
STATIC

Demand for physical gold was weak. Holdings of the SPDR Gold Trust, the world’s largest bullion exchange-traded fund, were static for a fourth session on Friday.

Meanwhile gold buying in India, the world’s biggest bullion consumer last year, declined, with appetite for the precious metal receding as the wedding season tails off.

Asset manager Fortis Investments told Reuters it favours gold as a longer-term play on both inflation and deflation. Gold is seen as an asset that holds its value in volatile times.

Among other precious metals, silver tracked gold lower, falling to $14.83 an ounce against $15.37. Platinum was at $1,251.50 an ounce compared with $1,261, while palladium was at $253.00 from $254.00.

UBS said in a note to clients that it was holding firm with its recommendation for investors to hold long positions in platinum.

“Although we like platinum’s fundamentals, we were wary of outright longs due to signs of slowing Chinese interest at prices above $1200, hence we bought platinum against even-more-extended gold.”

Dollar up on weak European industrial output

NEW YORK - The dollar rose against the euro and other key currencies Friday after a steep decline in eurozone industrial output.

The euro fell to 1.4021 dollars in New York trading at around 2100 GMT from 1.4106 dollars on Thursday.

The dollar also climbed against the Japanese currency, to 98.40 yen from 97.60 yen.

Terri Belkas, currency strategist with Forex Capital Markets, said the greenback staged a “broad rebound” against the major currencies.

She said “fundamentals were also working against the euro” after the Eurostat data agency reported that eurozone industrial production fell 1.9 percent in April over one month, bringing the drop over 12 months to a record 21.6 percent, the sharpest annual contraction on record.

The drop was steeper than economists’ forecast of a slump of 0.6 percent from March.

Neil Mellor, an analyst at the Bank of New York Mellon, also noted that the euro fell following the grim eurozone industrial output data.

But “recent trends in the major currency pairs have been driven largely by general US dollar weakness rather than the perceived strength of its counterparts’ underlying fundamentals,” he cautioned.

Belkas said traders would keep an eye out for the communique at the end of the weekend meeting of finance ministers and central bankers of the Group of Eight top world powers in Lecce in southern Italy.

She said that “indications that exit strategies for the stimulus measures enacted by members are being plotted could provide a boost to risk appetite.”

The US dollar, viewed as a safe-haven currency in times of economic uncertainty, usually falls if investors moved towards riskier currencies such as the euro.

“Well, it looks like we end the week with dollar bears on their back foot,” analysts at PNC bank said in a note to clients.

Among others factors that boosted the dollar was a comment by Japanese Finance Minister Kaoru Yosano that Tokyo’s confidence in US debt was “unshakable” and that the dollar was a safe global currency, they said.

“This was especially timely in Asia where surpluses abound and countries are heavily invested in US Treasuries. China and Japan are the two US largest creditors in that order, the analysts wrote.

The dollar also rose Friday to 1.0789 Swiss francs from 1.0701 a day earlier.

The pound fell to 1.6442 dollars from 1.6588.

Oil falls below $72 per barrel

AP)
13 June 2009
NEW YORK — Benchmark crude for July delivery fell 64 cents to settle at $72.04 on the New York Mercantile Exchange, the first time oil prices have fallen in several days.

In other Nymex trading, gasoline for July delivery fell 2.18 cents to settle at $2.0431 a gallon and heating oil dropped 1.59 cents to settle at $1.8375. Natural gas for July delivery slid 7.6 cents to settle at $3.857 per 1,000 cubic feet.

In London, Brent prices fell 87 cents to settle at $70.92 a barrel on the ICE Futures exchange.

Still, oil prices have more than doubled since March even though demand is down for the year and American storage tanks are bloated with a huge surplus.

Crude hit new eight-month highs this week, peaking Thursday at $73.23 a barrel.

On Friday, the Organization of Petroleum Exporting Countries dropped its daily demand forecast by 230,000 barrels, estimating that global consumption would shrink to 83.8 million barrels a day.

Dollar Weighed As Diversification Warnings Eclipse Growth Forecasts

Will the world diversify out of the US dollar and the liquid assets that it backs? Is it feasible? More importantly, is it advisable considering the still-fragile state of the global financial markets? These are the concerns market participants have developed for the American currency over the past week.

Dollar Weighed As Diversification Warnings Eclipse Growth Forecasts

GBP Breaks above

The greenback was mixed in the Wednesday session, slumping sharply against the sterling to a near 7-month low and edging up versus the yen.

Economic data from the US was better than expected earlier today. Existing home sales shot up by 2.9% in April to 4.68 million units, reversing a downwardly revised 3.4% decline in March. Traders will look ahead to data on Thursday, including weekly jobless claims, April durable goods orders and new home sales.

Rumors Pound Sterling

The greenback jumped sharply higher against the sterling and euro on rumors circulating earlier in the session over uncertainty over the UK political outlook. The dollar relinquished some of its strength to trade near 1.4180 versus the euro and 1.6190 against the pound.

The key May jobs data is due out tomorrow at 8:30 AM and traders will closely analyze the data to gauge the extent of the deterioration in the labor market. The unemployment rate is seen edging up further to 9.2% from 8.9% a month earlier while the non-farm payrolls are expected to post another loss of 520k jobs from 539k loss lost in April.

If the unemployment report is sharply better than expected, the likely scenario to materialize would be a rally in the US equity bourses, prompting a return to riskier assets which would ultimately be detrimental to the dollar.

USD Extends Gains

The greenback traded higher in the London session, starting the week where it left off from last Friday, extending its gains from the stronger than expected May non-farm payrolls report. The dollar pushed the euro to 1.3805 and the pound toward the 1.58-figure before relinquished some of its strength in New York trading. The major equity bourses traded lower, with the Dow Jones, Nasdaq and S&P500 down by around 1%, while both spot gold and crude oil drifted lower as well.

There has been speculation that the recent data, particularly the May non-farm payrolls report, point toward a bottom in the economic downtown – prompting an advance in the dollar and declines in stocks amid inflationary concerns. The Fed’s current monetary policy remains highly stimulative and we believe it will remain so for the remainder of the year and into early 2010. Thus, we deem it to be premature for markets to begin pricing FOMC rate hikes.

The economic calendar from the US will see on Tuesday, April wholesale inventories, wholesale sales, on Wednesday: the April trade deficit and May Federal budget, on Thursday: weekly jobless claims, May retail sales, April business inventories and on Friday: the June University of Michigan consumer confidence survey and May import / export prices. Retail sales for May are expected to reverse the 0.4% decline in April, improving by 0.2%, while the core retail sales figure is seen edging up by 0.3% from a 0.5% decline a month earlier. The April trade deficit is estimated to edge up to $29.0 billion from a month earlier at $27.58 billion. The Federal budget deficit is expected to surge in May to 195.0 billion compared with $165.93 billion in April. The dollar may come under pressure toward the latter part of the week as the twin deficits come into focus, likely to trigger some profit-taking in the latest greenback run-up.

This article contains the following sections:

FOREXNEWS

Instrument Margin Req. Per Lot Lot Size Approximate
Tick Value Spread Trading Hours (GMT)
Currencies
EUR/USD $25 10,000 Euros .0001 = $1 2 24 hours
USD/JPY $25 10,000 USD .01 = $1 2 24 hours
USD/CHF $25 10,000 USD .0001 = $085 3 24 hours
GBP/USD $25 10,000 GBP .0001 = $1 3 24 hours
USD/CAD $25 10,000 USD .0001 = $0.85 4 24 hours
EUR/JPY $25 10,000 Euros .01 = $0.80 3 24 hours
EUR/GBP $25 10,000 Euros .0001 = $1.60 3 24 hours
EUR/CHF $25 10,000 Euros .0001 = $0.70 4 24 hours
GBP/JPY $25 10,000 GBP .01 = $0.80 8 24 hours
GBP/CHF $25 10,000 GBP .0001 = $0.70 8 24 hours
CHF/JPY $25 10,000 CHF .01 = $0.80 4 24 hours
AUD/USD $25 10,000 AUD .0001 = $1 4 24 hours
NZD/USD $25 10,000 NZD .0001 = $1 4 24 hours
AUD/CAD $25 10,000 AUD .001 = $0.90 4 24 hours
EUR/CAD $25 10,000 Euros .0001 = $0.60 7 24 hours
EUR/AUD $25 10,000 Euros .0001 = $0.70 6 24 hours
AUD/JPY $25 10,000 AUD .0001 = $0.90 4 24 hours

Stock Market Indices
S&P 500 $50 $10 x price 1.00 = $10 0.50 Sunday 11:00PM - Friday 9:00PM (Closed 10:30PM - 11:00PM daily)
NASDAQ 100 $50
$10 x price 1.00 = $10 1.00 Sunday 11:00PM - Friday 9:00PM (Closed 10:30PM - 11:00PM daily)
Dow Jones Ind. $50 $1 x price 1 = $1 5 Sunday 11:00PM - Friday 9:00PM (Closed 10:30PM - 11:00PM daily)
Nikkei 225 $50 $1 x price 1 = $1 5 12:45AM - 3:15AM &
4:15AM - 7:25AM
DAX30 $50 $1 x price 1 = $1 4 7:00AM - 9:00PM
CAC40 $50 $1 x price 1 = $1 4 7:00AM - 9:00PM
FTSE100 $50 $1 x price 1 = $1 4 8:00AM - 9:00PM

Commodities
Gold (XAU) $50 $10 x price 0.1 = $1 75 24 hours
Silver (XAG) $50 $1,000 x price 0.001 = $1 30 24 hours
Copper $50 $100 x price 0.01 = $1 25 Sunday 11:00PM - Friday 9:00PM (Closed 10:15PM - 11:00PM daily)
Crude Oil $50 $100 x price 0.01 = $1 5 Sunday 11:00PM - Friday 9:00PM (Closed 10:15PM - 11:00PM daily)
Natural Gas $50 $1,000 x price 0.001 = $1 25 Sunday 11:00PM - Friday 9:00PM (Closed 10:15PM - 11:00PM daily)



MetaTrader 4
MetaTrader offers a 100,000 currency unit lot size. Smaller lot sizes can be traded by using fractional lots (e.g., trading 0.1 lots). Stock Market Indices, Gold, Silver, and Crude Oil are of equal contract size to e-mini contracts on the futures exchanges.

Instrument Margin Req. Per Lot Lot Size Approximate
Tick Value Spread Trading Hours (GMT)
Currencies
EUR/USD $250 10,000 Euros .0001 = $1 2 24 hours
USD/JPY $250 10,000 USD .01 = $1 2 24 hours
USD/CHF $250 10,000 USD .0001 = $085 3 24 hours
GBP/USD $250 10,000 GBP .0001 = $1 3 24 hours
USD/CAD $250 10,000 USD .0001 = $0.85 4 24 hours
EUR/JPY $250 10,000 Euros .01 = $0.80 3 24 hours
EUR/GBP $250 10,000 Euros .0001 = $1.60 3 24 hours
EUR/CHF $250 10,000 Euros .0001 = $0.70 4 24 hours
GBP/JPY $250 10,000 GBP .01 = $8 8 24 hours
GBP/CHF $250 10,000 GBP .0001 = $7 8 24 hours
CHF/JPY $250 10,000 CHF .01 = $8 4 24 hours
AUD/USD $250 10,000 AUD .0001 = $10 4 24 hours
NZD/USD $250 10,000 NZD .0001 = $10 4 24 hours
USD/ZAR $250 10,000 USD .001 = $10 100 24 hours
EUR/CAD $250 10,000 Euros .0001 = $6 7 24 hours
EUR/AUD $250 10,000 Euros .0001 = $7 6 24 hours
USD/MXN $250 10,000 USD .0001 = $10 100 24 hours

Stock Market Indices
S&P 500 $250 $50 x price 1.00 = $50 0.50 Sunday 11:00PM - Friday 9:00PM
(Closed 10:30PM - 11:00PM daily)
NASDAQ 100 $250
$20 x price 1.00 = $20 1.00 Sunday 11:00PM - Friday 9:00PM
(Closed 10:30PM - 11:00PM daily)
Dow Jones Ind. $250 $5 x price 1 = $5 5 Sunday 11:00PM - Friday 9:00PM (Closed 10:30PM - 11:00PM daily)
Nikkei 225 $250 $5 x price 1 = $5 5 12:45AM - 3:15AM &
4:15AM - 7:25AM
DAX30 $250 $5 x price 0.1 = $0.50 4 7:00AM - 9:00PM
CAC40 $250 $5 x price 0.1 = $0.50 4 7:00AM - 9:00PM
FTSE100 $250 $5 x price 0.1 = $0.50 4 8:00AM - 9:00PM

Commodities
Gold (XAU) $250 $50 x price 0.1 = $5 75 24 hours
Silver (XAG) $250 $5,000 x price 0.001 = $5 30 24 hours
Copper $250 $500 x price 0.01 = $5 25 Sunday 11:00PM - Friday 9:00PM
(Closed 10:15PM - 11:00PM daily)
Crude Oil $250 $500 x price 0.01 = $5 5 Sunday 11:00PM - Friday 9:00PM
(Closed 10:15PM - 11:00PM daily)
Natural Gas $250 $5,000 x price 0.001 = $5 25 Sunday 11:00PM - Friday 9:00PM
(Closed 10:15PM - 11:00PM daily)

Forex: GBP/USD: Pound weakens to 1.6400 after UK data

FXstreet.com (Barcelona) - The Pound has pulled down from levels at 1.6435 resistance to prices right below 1.6400 after UK Trade balance and Manufacturing output data was released.

UK trade gap widened to GBP7.0 Billion in April from a downwardly revised GBP6.5 billion in March. markets were expecting a deficit of about 6.4 billion in April. On the other side, UK Manufacturing output has increased 0.3% ion April, while it dropped 12.3% year on year.

The Pound dropped to levels around 1.6375 from 1.6435 before UK data was released. At the moment the Pound has picked up reaching prices right at 1.6400.


GBP/USD
GBP/USD (Jun 10 at 10:02 GMT)
1.6345/48 (0.18%)H 1.6443 L 1.6291S3 S2 S1 R1 R2 R3
1.6350 1.6367 1.6384 1.6418 1.6435 1.6452
[?]Trend Index [?]OB/OS Index
Strongly Bullish Neutral
Data updated on Jun 10 at 08:31 (15-minute timeframe)



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Currencies Bid As Traders Look to Build on Dollar Shorts; USD/JPY Commentary (Midday Snapshot)

MIDDAY SNAPSHOT & ANALYSIS OF SELECTED RATES

The USD has been well offered in the New York session of trade with many accounts still bearish on the Greenback, looking to take advantage of the latest slide in currencies to build on existing long positions. Data out of the US this morning was mixed with wholesale trade coming in on the softer side, while IBD/TIPP consumer optimism was better after breaking above the key 50 level for the first time since November 2008. Sterling continued to be a relative outperformer, as comments from Stephen Timms that UK measures were working, along with Treasury Byrne who said that the deficit would be halved in 4 years, helped to fuel additional gains. Also generating headlines was the news that the Treasury had granted permission to 10 major banks to repay TARP funds. Treasury Secretary Geithner said that the repayment was an "encouraging sign of financial repair." US equities are mixed, while gold trades flat and oil climbs higher, back above $69.00 to trade higher by some 1.50%.


Usd/Jpy: Has pulled back quite sharply on Tuesday with the market looking set to retest the previous resistance now turned support at 97.25 into the latter half of the session. However, any setbacks are seen limited to this area, with the overall structure now favoring additional gains over the medium-term after the market managed to close above shorter-term trend-line resistance off of the 2009 highs on Friday. A higher low is now sought out by 97.25 ahead of a fresh upside extension towards 100.00, to be confirmed on a break back above 98.90. Strategy: BUY @97.25 FOR A 100.25 OBJECTIVE, STOP @95.75. Recommendation to be removed if not triggered by NY close (5pm ET) on Tuesday.

NZD/USD: Trading the Reserve Bank of New Zealand Interest Rate Decision

The Reserve Bank of New Zealand is widely expected to hold the benchmark interest rate steady at the record-low of 2.50% this week as the Treasury Department anticipates the $128B economy to emerge from the recession in the fourth quarter of this year, led by a rebound in business confidence.

Trading the News: Reserve Bank of New Zealand Interest Rate Decision

What’s Expected
Time of release: 06/11/2009 21:00GMT, 17:00 EST
Primary Pair Impact : NZDUSD
Expected: 2.50%
Previous: 2.50%

Impact the RBNZ Interest Rate Decision has had on NZDUSD through the last 2 meeting
Period
Data Released
Estimate
Actual
Pips Change

(1 Hour post event )
Pips Change

(End of Day post event)

Apr 2009
04/29/2009 21:00 GMT
2.50%
2.50%
-29
-8

Mar 2008
03/11/2009 20:00 GMT
2.75%
3.00%
+22
+18

April 2009 RBNZ Interest Rate Decision

The New Zealand central bank cut the cash rate by another 50bp to a fresh record-low of 2.50% in April, and the RBNZ went onto say that they ‘expect to keep the cash rate at or below the currently level through until the latter part of 2010’ in an effort to steer the $128B out of its worst recession in over a quarter century. Moreover, Governor Alan Bollard stated that ‘the cash rate could still move modestly lower over the coming quarters’ as price growth falters, and the central bank head sees ‘it appropriate to provide further policy stimulus’ as global trade condition deteriorate. In addition, the Organization for Economic Cooperation and Development called upon the RBNZ lower rates further in order to stem the downside risks for growth and inflation as Governor Bollard expects the annual rate of unemployment to reach a 10-year high of 6.8% in the first half of 2010.


March 2009 RBNZ Interest Rate Decision


The Reserve Bank of New Zealand lowered the benchmark interest rate by 50bp to a record-low of 3.00% in March amid expectations for a 75bp rate cut, and policymakers may continue to take additional steps to shore up the economy as the region faces its worst economic downturn in over a quarter century. Governor Alan Bollard projects economic activity to rebound in the third quarter of this year as the cash rate remains at a ‘very stimulatory’ level however, the central bank head said that borrowing costs ‘could go lower’ as growth prospects deteriorate, but went onto say that a zero interest rate policy ‘would be unlikely, unusually, and would have some undesirable effects’ on the outlook for long-term stability. At the same time, the RBNZ forecasts inflation to grow at an annual rate of 0.7% in the third quarter, which is well below the 1-3% target range held by the central bank, and Governor Bollard is likely to ease policy further in the month ahead as the outlook for growth and inflation falter.


What To Look For Before The Release
Traders with access to market depth information via the FXCM Active Trader Platform may use it to gauge the potency of the economic data release as well as to shed some light on the market’s directional bias. Increasing volume ahead of the announcement will telegraph likely follow-through behind whatever move is to materialize, while an imbalance in available liquidity on the Bid versus the Offer side of the market will tell us the direction major institutions are likely favoring ahead of the announcement:


Bullish Scenario:

If we see substantially deeper available liquidity on the Bid side of the market, this tells us that major price providers in the market are looking to buy the Euro against the US Dollar. Considering that close to 60% of all FX market volume is cleared through just six top banks, we see it prudent to be on the same side of the trade as major institutions and will favor a bullish bias on EURUSD ahead of the data release. Bearish Scenario:

If we see substantially deeper available liquidity on the Offer side of the market, this tells us that major price providers in the market are looking to sell the Euro against the US Dollar. Considering that close to 60% of all FX market volume is cleared through just six top banks, we see it prudent to be on the same side of the trade as major institutions and will favor a bearish bias on EURUSD ahead of the data release.


How To Trade This Event Risk

The Reserve Bank of New Zealand is widely expected to hold the benchmark interest rate steady at the record-low of 2.50% this week as the Treasury Department anticipates the $128B economy to emerge from the recession in the fourth quarter of this year, led by a rebound in business confidence. However, the central bank may take additional steps to stem the downside risks for growth and inflation as businesses face fading demands from home and abroad, and firms may continue to scale back on production and employment throughout the second half of the year as growth prospects deteriorate. A Bloomberg News survey shows 6 of the 11 economists polled forecast the RBNZ to hold the cash rate steady this month, and projects the central bank to adopt a wait-and-see approach as businesses confidence improves. At the same time, a report by Statistics New Zealand showed household spending slumped for the sixth consecutive quarter during the three-months through March to mark its worst slump on record, while a separate report showed employment plunged 1.1% during the first quarter to mark the biggest contraction since 1989, and the data reinforces a weakening private consumption as households face a weakening labor market paired with falling home prices. Meanwhile, inflation expectations slipped to an annual rate of 2.2% in the second quarter, while producer price unexpectedly fell 1.4% in the fourth quarter, and the downside risks for price growth could lead the central bank to take additional steps in an effort to stem the risks for deflation. Nevertheless, RBNZ Governor Alan Bollard signaled that the board is willing to lower the interest rate further during an interview this week, and went onto say that they are prepared to take further steps if ‘monetary policy wasn’t having its normal orthodox impact’ to stimulate the economy. As the central bank maintains a 2-3% target range for price growth and holds a dovish outlook for inflation, easing price pressure could lead Governor Bollard to take additional steps to jump-start the ailing economy, and an unexpected rate could is likely to weigh on the exchange rate as investors weigh the outlook for future policy.

Trading the given event favors a bullish outlook for the New Zealand dollar as market participants forecast the RBNZ to hold the benchmark interest rate steady at the record-low, and price action following the rate decision could set the stage for a long kiwi trade. Therefore, if the central bank attempts to put a floor on the exchange rate, and holds the cash rate steady at 2.50%, we will look for a green, five-minute candle following the release to confirm a buy entry on two-lots of NZD/USD. Once these conditions are met, we will place our initial stop at the nearby swing low, or a reasonable distance taking volatility into account, and this risk will determine our first target. Our second target will be based on discretion, and we will move the stop on the second lot to breakeven once the first trade reaches its target in order to preserve our profits.

In contrast, deteriorating trade condition paired with the dour outlook for inflation could lead the RBNZ to surprise the markets with a rate cut as the central bank attempts to jump-start the ailing economy. As a result, if the board unexpectedly lowered the benchmark interest rate 25bp or more, we will look to sell the NZD/USD, and will follow the same strategy for a short kiwi-dollar trade as the long position listed above.

Key Events Next Week: US Retail Sales, Trade Balance, RBNZ

Key Events Next Week: US Retail Sales, Trade Balance, RBNZ
RBNZ will meet Thursday to discuss about interest rate. While the market has widely priced in a month of pause, it's still likely for the central bank to 'shock' the market by announcing a 25 bps reduction as policymakers have earlier expressed their disappointment about domestic banks' sluggishness in passing the cuts to the public. Australia's employment in May should have driven much interest after a surprising rise in the number of jobs in April. However, we still believe a pullback will be seen in May.

International trade data will be released in the US, UK and Canada. Stabilization in economic outlook and rally in crude oil price over the past months should have shown some changes the picture of trade balance in May.

Jun 11: New Zealand: RBNZ Rate Decision

After reducing the OCR by 575 bps in previous months, the market forecast the RBNZ to remain sidelined next week as Governor Bollard may prefer to reserve some bullets for future use - when unemployment rate rises rapidly. That said, we do not rule out the possibility of another 25 bps reduction Thursday.

Although signs of recovery have been displayed in New Zealand and other parts of the world, inflation pressure has continued easing, retail sales has remained weak and employment condition has deteriorated further.

Since the previous meeting in April, NZD has appreciated by almost 20% against USD. NZD's strength is tightening the monetary policy in nature and we believe the central bank would explicitly talk about the issue in the post-meeting statement. It's also possible for RBNZ to cut rates in attempt to bring the currency down.

We believe the central bank will reiterate the statement in April that 'we expect to keep the OCR at or below the current level through until the latter part of 2010. The OCR could still move modestly lower over the coming quarters'.

RBNZ will also release the June Monetary Policy Statement (MPS). We expect the central bank have revised down GDP growth to -2.5% and +1% in fiscal 2009 and 2010 from corresponding -2.2% and +3.2% as projected in March. For inflation, CPI probably have been downgraded slightly from +3.1% and +1.6% in fiscal 2009 and 2010, respectively.





Jun 10: International Trade Balance (April)

US: US' trade deficit is expected to have widened to $29B in April from $27B in the prior month as imports should have risen while exports remained on the downtrend. That said, decline in exports should have moderated as global economic recession has stabilized. Released last week, export orders components of ISM manufacturing index has been rising (May: 48) after reaching a trough at 35.5 in December. This gave us further evidence on improvement of exports in the US.



Canada: Trade surplus in Canada should have modestly increased to CAD 1.12B in April, as driven by surge in oil price, after a strong rise to CAD 1.1B in March. China's import data remained robust in April and it had probably helped exports data in Canada. Moreover, improvement was also seen in lumber and auto part exports. However, appreciation in Canadian dollar against USD might have affected exports on the downside. Concerning imports, a small bounce is anticipated following a -4.4% decline in April.





UK: Trade deficit probably narrowed further to 6.4B pounds in April from 6.6B in the prior month. Despite the over 20% appreciation in sterling, the currency remained undervalued given the sharp fall in late 2008 and this made foreign goods appeared to be more expensive than domestic products, making decline in imports outpace decline in imports. Moreover, exporters have tried to improve profit margin by raising exports price as sterling still looked relatively cheap. Recent improvement in international trade gave further signals that UK's trade volume should have stabilized.

Jun 11: US: Retail Sales (May)

After 2 months decline, US' retail sales probably increased +0.9% mom in May as led by rise in auto sales and gasoline prices. Unit auto sales recorded a jump to 9.9M in May, the highest level since December. Although part of the sales increase was driven by dealers' discounts, we still believed some automakers did well last month and contributed increase in nominal sales.

Core retail sales (excluding autos, gasoline and building materials) should have risen +0.4% mom, following a -0.3% drop in April. Chain-store sales, which declined -0.6% in May, were worse than consensus as high- to mid- end retailers' performance was disappointing during the month.



Jun 11: Australia: Unemployment Rate (May)

Although the number of jobs surprisingly increased 27K which lowered the unemployment rate to 5.4% in April, the market forecast some correction in May. The Australian labor force survey probably showed a decline of 45K in payrolls during the month and pushed unemployment rate to 5.8%.

Mid-Day Report: Dollar Digests Gains, Euro Pressured by Ireland Downgrade

Mid-Day Report: Dollar Digests Gains, Euro Pressured by Ireland Downgrade
Dollar retreats mildly in early US session, just ahead of key near term resistance against Euro and Sterling, after soaring for the early part of the day. Treasury yield opens lower with yield on 10 year T-bond down mildly, breaching 3.8% level, but loss is so far limited. The greenback looks set to consolidate recent gains and some sideway trading might be seen in near term before having a test of key near term resistance again. On the other hand , Euro is noticeably weak in crosses as Ireland's credit rating was downgraded by S&P for the second time this year from AA+ to AA, at the same level as Japan, Slovenia and UAE, with a "negative outlook".

There are more news about recovery in the global economy. OECD composite leading indicators rose 0.5 pt to 93.2 in April even though it's still 8.3 pts lower than that in Apr 2008, suggesting easing in the global recession. Meanwhile, there were strong indications that the downturn may have hit bottom in Canada, France, Italy and Britain. There were signs of improvement in Japan, Germany and US but the leading indicators are still pointing to a slowdown.


While there are still talk about dollar's status as world's reserve currencies, markets are paying little attention to theses speculations for the moment. Indeed, dollar is positively supported by news that BRICs countries, (Brazil, Russia, India and China) increased reserves by more than $60b in May to limit currency gains. The number represents the largest dollar buying in a year in Brazil, largest gains since Jan 2008 in India and larges since July in Russia. While there have been talk about discussion of "de-dollarization" in the BRIC summit on Jun e 16 in Russia, markets see last months dollar buying as a sign that BRICs countries are still dependant on the greenback as reserve currency.

On the data front, Japanese current account surplus widened to 0.97T yen in Apr. Eco watchers survey also improved to 36.7 in May. Swiss unemployment rate jumped to 3 year high of 3.5% in May. Eurozone Sentix investor confidence improved more than expected to -27 in Jun. Germany Factory orders though, fell more than expected by -37.1% yoy in Apr. Canadian housing starts rose less than expected to 128k in May.

USD/CHF Mid-Day Outlook
Daily Pivots: (S1) 1.0708; (P) 1.0807; (R1) 1.0951; More

USD/CHF retreats mildly after hitting as high as 1.0985 earlier today. But after all, intraday bias remains on the up side as long as 1.0834 minor support holds. The break of 1.0952 resistance affirms the case that whole fall from 1.1740 has completed at 1.0590 already. Further rally should then be seen to next key resistance zone of 1.1158/1740. On the downside, below 1.0834 will turn intraday outlook neutral first. But pull back should be contained above 1.0590 and bring rally resumption.

In the bigger picture, price actions from 1.2296 are treated as consolidation to whole rally from 0.9634, with first leg completed at 1.0366, second at 1.1963. Break of mentioned 1.0952 resistance argues that the third leg from 1.1963 has completed at 1.0590 too and should bring strong rise towards 1.1158/1740 resistance. Nevertheless, in such case, we'd favor that such consolidation is development into triangle pattern and hence, upside should be limited by 1.1158/1740 initially and bring one more fall before completing the consolidation. However, break of 1.1963 will serve as the first signal that whole rally from 0.9634 is resuming. On the other hand, note that a break of 1.0590 will indicate that fall from 1.1963 is still in progress for 1.0366, or even further to 100% projection of 1.2296 to 1.0366 from 1.1963 at 1.0033 before completing the consolidation from 1.2296.

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