Recent Dollar Gain May Mean Big Drop Soon | ForexGen

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The recent fast growth of the U.S. dollar against the euro doesn’t mean that it’s out of the long-term bearish trend. Slowing economy and the risk of rate cuts even with a rising inflation are still weighing down on dollar.

Since the beginning of August the dollar surged 4 percent against the Eurozone currency. This was enough for many large investing banks to advice their customers to stop betting on more gains. Analytics believe that the ongoing housing and financial slumps in U.S. won’t allow Fed to raise the interest rate this year.

According to Barclays Plc (a London-based bank) and Merrill Lynch & Co. (a New-York based bank), the 5.1 percent growth of dollar against the basket of the 6 most-traded currencies that was seen in the past 3 weeks can’t be sustained by the American economy.

There is a little chance for the U.S. to return to the previous high rates of the GDP growth and an inflation rate below 3.3 percent. Since 2000 dollar lost more than 44 percent against the euro and GDP growth slowed to 1.9 percent, while inflation accelerated to 5 percent. Current interest rate situation offers no attractive opportunity for the Forex traders to bet on the U.S. dollar in a long term.

EUR/USD rose from 1.4944 to 1.5065 as of 8:50 GMT today — after it opened with a rather large gap copared to Friday’s 1.5005 close rate; currently EUR/USD demonstrates the strongest gain since June 6. USD/JPY declined from 110.37 to 109.74.

Aussie and Kiwi Continue Bearish Trend | ForexGen

Both Australian and New Zealand currencies continued to fall against the U.S. dollar today as the traders’ confidence that the central banks of those countries will cut interest rates soon rose and the dollar continued its growth against euro, pound and yen.

The Australian dollar (also known by its nickname Aussie) has already lost more than 11.3 percent since it reached its 25-year maximum against the U.S. dollar on July 15. The Reserve Bank of Australia left interest rates unchanged on its last meeting on August 5, saying that the current decrease in economic output will allow lower lending rates.

Apart from the high interest rate, Aussie was supported by the rising oil and commodity prices. With the current decline in the crude oil prices this support is disappearing, allowing the faster drop for the Australian currency.

The New Zealand dollar that is also know as kiwi declined to the lowest rate since September 11 today as the further reports on housing slump ensured traders that the Reserve Bank of New Zealand will have to continue lowering the interest rates this year.

AUD/USD fell for the eleventh day today — from 0.8814 to 0.8770 as of 7:37 GMT with the daily minimum at 0.8730. NZD/USD declined for the sixth day today — from 0.6972 to 0.6963 with a daily low at 0.6933. AUD/NZD also dropped today reflecting the weakness of Aussie compared to kiwi in the current situation; the currency pair went down from 1.2630 to 1.2588.

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Poland Needs to Adopt Euro More Urgently | ForexGen

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According to Regional Development Minister of Poland Elzbieta Bienkowska, euro should be adopted as soon as possible because zloty’s appreciation partially eliminates the value of the financial aid made by European Union and which is denominated in euro.

There is also a concern about the damage to the economic growth that may be caused by the rapidly strengthening national currency. Bienkowska urged country’s financial authorities to accelerate the euro adoption process:

Looking at the zloty exchange rate since Poland joined the EU, it seems obvious that euro adoption would be the most rational solution. It would enable us to avoid the risk created by the zloty’s strength, which may continue in the next EU budgetary period.

The Polish zloty rose 17 percent against the European currency since the country’s entry into European Union in 2004, affecting the real value of 12.8 billion euro of the financial aid received during the first two years.

Current government prefers to link zloty’s exchange rate to euro for the year or two prior to the actual adoption. Adopting euro requires also low inflation, budget deficit and public dept.

EUR/PLN declined from 3.2701 to 3.2635 in the early trading today as the zloty remained quite stable against the U.S. dollar, which is currently rising against the euro.

Pound at New Record Low in Almost 2 Years | ForexGen

The Great Britain pound rose today against the U.S. dollar for the first time in the last 10 days after reaching a new bottom level since the mid October 2006.

The expectations that the Bank of England will cut the interest rate at it next meeting rose after BoE reduced its economic growth forecast. Pound managed to lose more than 7.6 percent during its downfall since reaching a local high on July 15.

5.8 percent loss was recorded during the last 10 trading days. Yesterday Bank of England Governor Mervyn King said yesterday that he saw a «chill in the economic air» as he commented the fastest climb in the unemployment in July in almost 16 years.

Market analysts believe that the central bank will probably cut the interest rate as soon as the next month. The pound sterling is reacting negatively on such expectations.

GBP/USD rose from 1.8693 to 1.8711 as of 9:10 GMT today after reaching 1.8619 — the lowest level since October 11, 2006. EUR/GBP posted a first decline in three days today — it went down from 0.7983 to 0.7967.

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China’s Yuan Heads for 4th Weekly Loss | ForexGen

The Chinese yuan is currently heading for its fourth weekly decline against the U.S. dollar for the first time since the end of the peg to dollar in 2005.

The currency dropped just little more than 0.1 percent this week adding to a total of more than 0.7 percent in a losing streak lasting from July 18. The Chinese government is probably cooling down yuan’s appreciation to support the exports and country’s production.

According to the recent reports, China’s industrial growth advanced at a slowest pace since February 2007 last month, while the second quarter economic growth was the lowest since since 2005.

Currency strategists suggest the end of the one-way yuan’s appreciation as they think that the GDP growth may moderate even further. Some volatility with corrections and retractions will probably prevail on the yuan’s foreign exchange market for the next few months. Nevertheless, the growth of the Chinese currency against the dollar in a long term is inevitable.

USD/CNY rate rose from 6.8600 to 6.8669 this week as of 7:47 GMT.

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Margins in Forex Trading - Importance of Margins for Profit | ForexGen

Trading in the Forex market is done with “lots” and “mini-lots” of currency pairs. These lots and mini-lots are leveraged money, which is what allows you the potential to make so much profit from trading currency in the Forex. The standard size for a lot is $100,000 in currency, while a mini-lot usually represents $10,000 in currency. What leverage allows, is that you don”t need $100,000 to trade $100,000 worth of currency. That’’s where leverage comes in.

If you have leverage of 100:1 then you only need $1,000 to trade a lot, since the money is leveraged at around 100 to 1. Most leverage comes at levels of 50:1, 100:1, and rarely at 200:1, although those ratios do exist out in the world of Forex trading.

These are the most common amounts used, though sometimes you might hear about a “micro-lot” being traded. A micro-lot is 10% of a mini-lot and has a value of $1,000 of currency. Usually, though, all trading will be done with lots and mini-lots. The use of lots allows more trading because a smaller amount of money (the margin) can allow a trader to control a much larger stake of actual currency.

Margin, leverage, lots, and mini-lots are very much connected and allow the common trader to be involved in the Forex market, since you don”t need a fortune to be able to trade.

Traders can trade larger amounts of money with leverage than they could otherwise afford, allowing them to make a much larger return on their trades. This occurs because money is being returned on the entire lot, not just on the initial amount in the trader’’s account. You don”t just get the raise in pips that come from a $1,000 lot, but you get the raise in pips from all the money that was leveraged by that lot.

This is how a trader can make profit on a .0001 raise in a currency value, because the sheer amount of currency involved is likely leveraged 100 times over.

The same can happen the other way, however, so while the Forex market offers unmatched opportunities in gaining profit, leverage also magnifies losses when the trader is on the wrong side of a market swing.

You need a good proven trading system to avoid being on the wrong end of a market swing, because as with any market as open and volatile as the Forex, where there’’s great opportunity, there is also great risk.

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Day Trading and the Mind | ForexGen

What impact your mind frame has on your day trading activities will in part be determined by how emotionally tuned you are. In some cases, if you happen to blow with your emotions, your day will be heavily affected by other things in your life, frustration, or a few bad trades. In other cases, you may have a high tolerance for emotional strife before you believe it affects your daily dealings. In either case, the mind frame you enter the day with counts.

Because day trading is a solo activity, only you get to determine how your day goes and how you handle the events of the day. Because of this solo activity, you may also need to develop a higher level of self awareness. Your mood can become your monkey on your back even during a good trading day. If you allow a downcast mood to factor into your decisions, you are no longer making objective decisions. Using emotion through the trading day is a definite sign of potential loss. Being objective helps you make objective decisions and the introduction of emotion into that equation is a good recipe for loss.

On top of the unexpected emotional ups and downs of every day life, you also need to take into account the typical rhythm that your body goes through. Some people are morning people with clarity of mind and others just don”t perk up until later in the day. Know yourself, and your own natural biorhythms, and you will be more readily capable of determining the best time to lay out your plan for the following day. In some cases, you are going to need to learn to trust your clear conceptualizing because when you go to execute your trades, your mental cloudiness may want to over rule the clearly thought out plan.

If you are a morning person with the wind at your back all the way until noon, use that time wisely. During your natural down time, rely on your good judgment from the morning. If you are a natural night owl, use your morning to execute trades that were well thought during your peak times the day before, again trusting your earlier clarity. This is a process that takes some traders a couple of years to really get down. They allow their own poor judgment of their fatigued time to get in the way of what was otherwise a perfectly awesome plan.

Developing self discipline is a necessity. Learn everything you can about yourself, the way you make certain decisions at certain times of the day, and learn to trust your most clearly thought out plans. Some traders keep a notebook beside them and note their mood and their overall energy level as they make decisions, and then they go back and keep track of the quality of those decisions to help figure out what time of the day they make the clearest and most profitable decisions.

This requires a dedication and a time commitment, but those who have successfully tracked themselves are successfully happier with their results from this exercise. Should you choose to follow the exercise, you can not pick and choose which decisions you keep track of. You must keep account of every single one and the shortest amount of time that is recommended is two weeks, with most people finding the best results between one and three months.

Well defined plans are vital to creating wealth over time and executing intelligent and profitable trades. Defining those plans during the times of the day when you are most apt to make the best decisions is only logical. Creating an environment that is healthy enough to allow you to leave your emotional issues at the door when you sit down to trade is also a vital part of keeping a clear trading head and trading without emotional involvement. These are easier said than done, but just like everything else, with practice comes better.

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