Canadian Dollar Pare Gains on Risk Aversion

In the end of this week’s session the Canadian dollar pared its previous gains as risk aversion rose this Friday, affecting U.S. stocks performance and also the crude oil, the main Canadian commodity exported to the United States, influencing the loonie’s outlook.
The Canadian currency rose 12 percent versus its U.S. counterpart this year, and since June, Bank of Canada officials are stressing on the fact that a very strong loonie may bring a negative impact to national exporters, and measures to be taken are not ruled out, if the loonie climb further. This month the Canadian currency has been one of the biggest losers versus its U.S. counterpart among the 16 most traded currencies in foreign-exchange markets, losing 1.3 percent as this week ended, which is certainly a favorable scenario for Canadian exporters.
The rally perceived in the beginning of the month which set the loonie to around 1.07 per U.S. dollar raised eyebrows in the Bank of Canada, considering that a stronger currency decreases competitiveness for one nation’s products, with statements regarding this fact already helping to prevent the rally to continue temporarily. It is unlikely that the loonie will rise further, as the national bank already announced that it will take measures to stop its climb, so a rather neutral or bearish trend can be expected for the Canadian currency in the short term.
USD/CAD closed this week at 1.0913 from a previous rate of 1.0863 on Thursday.

Poland’s Economic Outlook Provide Support for Zloty

The Polish currency extended last week’s gain this week as the Eastern European nation is showing one of the quickest recoveries in the region, increasing attractiveness for the zloty regionally.
After growing beyond economists expectations for the last quarter, Poland is being considering one of the most solid economies in the region, fact which is favorable for the zloty to gain versus several currencies, but mainly against the euro as the Polish currency suffered a severe devaluation during the worse moments of the global slump. The Polish currency climbed for a second week in a row on the country’s economic outlook.
EUR/PLN closed at 4.0923 from a previous rate of 4.1162 yesterday.

Yen Gains on New Tax Law

The Japanese currency extended its weekly gains today on speculations that Japanese investors are bringing overseas investments capital back to the country to profit from a new tax law, making the yen to climb further in an already pessimistic scenario.
Various factors provided support for the yen to gain for the third day in a row versus most of the 16 most traded currencies as today speculations indicated that last quarter’s GDP figures in the United States will indicate a deeper recession than in previous one, fact which is spurring demand for the relative safety of the Japanese currency. The pound also declined versus the yen as Japanese exporters are repatriating assets to the country to benefit from new tax regulations, even if the highest rise in home prices was posted today in the United Kingdom.
Analysts indicate that this week’s gains for the Japanese currency are very much related to new Chinese regulations approved in order to avoid further chaotic financial episodes in the country, but provoking side effects of pessimism in trading markets. Today’s quarterly U.S. GDP report is also causing market sentiment to have a bearish tone, since a longer recession in the U.S. would certainly rise risk aversion among traders, a yen positive factor.
GBP/JPY traded at 151.50 as of 10:46 GMT from a previous rate of 153.45 yesterday. EUR/JPY followed, from 134.51 to a current price of 133.52.

Pound Down on Chinese Comments

The U.K. currency posted losses today versus the euro and the greenback as stocks declined in the country and the Chinese Premier Wen Jiabao affirmed that the world economy is still facing a period of uncertainty, which brought risk aversion back in trading markets.
A reversal trend in equities markets pushed the British currency down and the MSCI World Index lost consistently mainly influenced by Asian stocks, who had a negative day after Chinese Premier Wen Jiabao made pessimist remarks towards the future of the world economy. The pound also lost consistently versus the euro as the Eurozone economy is showing signs of better economic performance than the British Isles, fact which is leaving room for speculations that interest rates will remain at record low levels set by the Bank of England this year.
p;Chinese declarations today affected the already faltering performance of the British currency, which is still declining as a consequence of BOE’s quantitative easing policies, which so far have been unable to rescue the U.K.’s economy from the worst recession in 60 years. The pound is likely to remain bearish unless the economy in the United Kingdom starts to show solid evidences of recovery, which haven’t been the case so far.
GBP/USD traded at 1.6372 as of 10:36 GMT from a intraday rate of 1.6494. EUR/GBP rose to 0.8728 from 0.8677.

Hungarian Forint Declines on Interest Rate Speculations

The forint is starting this week under pressure falling from the highest level in almost 10 days before the Hungarian central bank meeting today, which is likely to slash the national benchmark interest rate to a record low for the country since the end of the socialist era.
The Hungarian central bank will publish its decision regarding the current interest rate levels today at noon, GMT time, and according to most economists the Central European nation is likely to cut the rates to a record low of 8 percent from the present 8.5 percent, the highest in the European Union together with its neighboring country, Romania. The speculations regarding the interest rates are forcing the forint down as it can be understood that current government efforts to stimulate the economy are not being sufficient to revive Hungary from its worst recession in 18 years, as unemployment doubled since last year, and the IMF bailout was not enough to revive growth in the nation.
Analysts indicate that even if speculations are suggesting a 0.5 percent slash for the national interest rates in Hungary, the central bank may once again surprise economists as the previous time and go for a full 1 percent cut, which would be definitely worse for the forint’s performance.
EUR/HUF traded at 268.70 as of 10:21 GMT from an opening rate today in Budapest of 268.50. USD/HUF followed the same trend climbing slightly to 187.68.

Will the Dollar Rebound This Week?

The U.S. currency lost towards the end of the past week as several factors improved investors’ confidence worldwide, attracting investors to emergent-market currencies, as commodities and stocks surged fueled by positive reports in Europe and Asia, shunning investors from greenback priced assets.
Last week’s end was predominantly optimistic in markets around the world, mainly with Germany and France posting signs of economic growth as PMI increased in both countries and as Federal Reserve Chairman Ben Bernanke stated that the recession is easing adding to the already risk driven attitude among traders globally. The greenback suffered significant losses due to this new wave of risk appetite, since the global slump easing is reflecting in higher-yielding assets appreciation, which declines attractiveness for the relative safety of the greenback.
The forecast for this week regarding the U.S. dollar will rely mainly on reports to be released in Wednesday, when new home sales and durable good orders will be published, and mainly on Thursday, when the quarterly gross domestic product performance is due to be released together with unemployment claims, which are likely to reflect positively for the greenback if the data comes beyond expectations, mostly regarding the GDP, which is forecast to indicate a decrease in the U.S. recession figures, but still remain in the negative field.
EUR/USD ended the week traded at 1.4328. GBP/USD closed at 1.6501.

German Manufacturing Provides Support for Euro Climb

Germany and France posted favorable reports today indicating that the wealthiest countries in the Eurozone may be finding its way out of recession, evidence which helped the euro to gain versus several currencies towards the end of this week’s session.
After surprising economists worldwide several days ago when Germany and France posted an unexpected growth for the second quarter, today, the strongest economies in the Eurozone bloc posted a rise in manufacturing and services industries, once again going beyond estimations and bringing optimism suggesting that the current recession in the region may be having its final days. The PMI numbers were not sufficient to make the euro to rally versus the yen, since China affirmed that it may restrict capital requirements for domestic banks, causing an instant negative reaction in Asian stocks, which is a yen positive factor.
Analysts evaluate the current market reaction to European PMI numbers as a short-term market impulse, even though the data provided are solid and indeed an evidence of economic improvements, mainly in Germany, while France performed less positively in these reports. Germany is the Eurozone’s economic heart, and when the country finds its way out of recession the Euro is like to be bullish.
EUR/USD traded at 1.4303 as of 9:55 GMT from a previous rate of 1.4237 in the intraday comparison. EUR/JPY traded near neutrality from yesterday’s rate at 134.12.

Quantitave Easing Speculations Affect Pound Performance

The pound erased yesterday’s gains this morning after the Bank of England may insist in further quantitative easing measures as an attempt to revive the weakened British economy, which was one of the most affected by last year’s credit crunch.
The pound is losing today versus most of the 16 major currencies after Bank of England Governor Mervyn King suggested that further measures should be taken in order to rescue the British economy from the current recession, raising speculations that interest rates in the country will remain in bottom levels. Quantitative easing measures, such as printing out more bank notes are likely to be used by the Bank of England to stimulate the economy domestically, which would certainly reflect in a prolonged period of losses for the pound, currency which declined massively since last year’s second semester. Naturally opposed to the pound’s movements, U.K. gilts rose today.
The pound will remain pressured in the short-term, according to analysts. The United Kingdom is being one of the most affected countries by the current global recession, and measures taken so far proved to be ineffective to reestablish a sustainable economic growth in the country, which is influencing the nation currency negatively, being the pound one of the most uncertain bets among the top 6 traded currencies.
GBP/USD traded at 1.6422 as of 11:12 GMT from 1.6588 hours before BOE’s last declaration. EUR/GBP rose to 0.8600 from 0.8525.

Euro Reverts Losing Trend on Confidence

The euro stopped its decline versus the yen and the dollar today as optimism reappeared in Europe after a report indicated that German business confidence had the highest rise in more than a year, spurring demand for the Eurozone currency in forex markets.
After several days of consecutive declines the Eurozone currency reverted its trend and climbed after the German ZEW economic sentiment, a highly considered index by traders, climbed the most in more than a year, indicating that the wealthiest economy in the European Union may be dodging its way out of recession. A part from regional news in Europe, an U.S. housing report is likely to show positive numbers today, which declined attractiveness for the currencies which gained the most versus the euro during the past days, the Japanese yen and the U.S. dollar.
The surprising high ZEW economic sentiment helped European markets to pare some of the losses from previous days, but even with a record high for this report, the euro’s did not manage to rally sharply, still indicating that traders remain rather cautious while investing in euro-price assets. Analysts forecast that the euro may gain further if the U.S. housing reports push risk appetite higher today.
EUR/USD traded at 1.4119 as of 10:23 GMT from a previous rate of 1.4047 yesterday. EUR/JPY traded at 134.28 from a previous rate of 132.73 yesterday.

Pound Falls as Real Estate Crisis Deepens

After rallying to a 10-month high versus the dollar two weeks ago, the pound is declining severely versus most of the main traded currencies, as the real estate scenario deteriorates in the United Kingdom, shunning investors from pound-priced assets.
The most reliable internet real estate portal in the U.K., Rightmove Plc, indicated that house prices in Britain declined 2.2 percent this month, after climbing 0.6 percent in July, a fact which immediately declined attractiveness for the pound, since the real estate sector in the U.K. was the main responsible to plunge the country in its worse recession since the Second World War. Stocks worldwide also declined, pushing investors to safer bets, making the Japanese yen and the U.S. dollar the biggest winners today versus the Great Britain pound, as reports indicate that economic conditions in Europe remain worse than in other areas like in South Pacific and Latin America.
Both international and domestic events are affecting the pound this week, and may plunge it to lower levels in the short term as risk aversion is growing worldwide, at the same time that the British economy is unable to show signs of solid recovery, which push traders naturally away from investing in the country.
GBP/USD traded at 1.6301 as of 11:14 GMT from an opening price of 1.6488 yesterday. EUR/GBP rose to 0.8626 from 0.8595.

Negative News Fuel Yen’s Rally

The Japanese currency started another week gaining versus most of the main currencies as several domestic and international events spurred demand for refuge currencies, affecting negatively mainly currencies in Europe this Monday.
Today’s Japanese quarterly GDP figures were posted reaching a 3.7 growth in the second quarter, which was below expectations, raising concerns that an economic recovery in Asia may take longer to appear, oddly enough favoring the yen in foreign-exchange markets. Colonial BancGroup Inc., a traditional U.S. lender, had its operations terminated due to its incapability of managing its growing debts, being followed by other lenders in Arizona and Pittsburgh, raising the number of total banking bankruptcies to 77 in U.S. this year, a fact which certainly adds to pessimism in trading markets. The pound was one of the biggest losers versus the yen today, as home prices continue an historic decline in their price in Great Britain.
Traders are once again purchasing the yen massively in order to guarantee their portfolio’s safety, according to analysts. Even if an economy recovery starts indeed to happen, there are still many global slump consequences that will become evident, raising the number of bankruptcies and unemployment figures worldwide, which will certainly raise attractiveness for the safety profile of the Japanese currency.
GBP/JPY traded at 154.37 as of 9:34 GMT from a previous rate of 156.35 when markets opened this morning in Asia. EUR/JPY continued its decline, being traded at 133.36 from 134.41.

German Unexpected Growth Improves Zloty Rally

The Polish currency benefited from yesterday’s report indicating an unexpected growth of 0.3 for the German economy in the second quarter, which improved investors’ confidence towards the future of European economic conditions.
Among emergent-market currencies, the zloty is being one of the best performing currencies, and yesterday, Germany’s quarterly GDP report pushed the Polish currency even further to higher levels, as improving economic numbers in the region led traders to speculate that the Polish central bank is likely to stop cutting interest rates, which is favorable for the zloty. The zloty has advanced 19 percent since February when it bottomed out to the lowest level since the country joined the European Union, and being Germany the main trading partner of the Polish nation, yesterday news impacted investors in Warsaw heavily, pushing stocks and the national currency up.
Poland is likely to benefit intensively from the Eurozone economic recovery among the eastern EU members, since its tax cut policy made them able to be the only country in the region to dodge recession in the first quarter. The influence of German economic figures is extremely high in Poland, not only for being the nation’s main trading partner, but also for being the wealthiest and most dynamic economy in the European Union.
EUR/PLN traded at 4.1200 as of 9:51 GMT from a previous close yesterday at 4.1340.

Inflation Figures Affect Pound Performance

The pound started another day losing versus the dollar and the euro in the European session as the Bank of England affirmed that the 2 percent inflation target won’t be met, raising concerns regarding the British economy’s health.
The yen was one of the biggest winners today versus the pound, after Bank of England Governor Mervyn King stated that it will take time for the Great Britain banking sector to recover from the current delicate situation, lowering traders’ bets that interest rates will be raised this year in the United Kingdom. The current recession and credit shortage in the British Isles are likely to set the monthly inflation below the 1 percent barrier, indicating the seriousness of the British financial system situation. It is unlikely that the Great Britain will initiate a substantial recovery before 2010, which weighs massively on the pound.
The previous week rally for the British currency was almost entirely pared as international news, mainly from China, and grim speculations domestically annulled the pound’s chances of continuing to climb further. Due to a extremely liberal credit pre-crisis credit system, the British Isles are being one of the must punished regions in the world with the consequences of the global slump.
GBP/USD traded at 1.6441 as of 10:44 GMT from yesterday’s rate of 1.6457. EUR/GBP climbed to 0.8603 from 0.8574 yesterday.

Polish Zloty Down as Rally May Halt Economic Growth

The Polish currency, which was climbing systematically during the previous two months as signs of economic recovery attracted traders to this emergent European Union economy, had a sharp decline this week as the current currency rates may affect the economic recovery in the nation.
Poland’s economy was the best performer among the 10 eastern European union members in the first quart of this year, after the national government cut taxes to stimulate the economy the zloty climbed 14 percent versus the euro, a rally which is raising concerns about the future conditions of the Polish economy. Today the zloty had the sharpest fall in two months, leading a day of declines in the currency market for eastern European countries, as pessimism brought investors back to safer markets.
EUR/PLN closed today in Warsaw at 4.1736, from an opening price of 4.1215, making the zloty to slide more than 1.5 percent.

Australian Dollar Down on Chinese Negative Data

The Australian Dollar lost today against several currencies like the yen and the U.S. dollar after a negative report in China pushed investors back to safer assets, damping demand for the Aussie’s riskier profile.
The Australian currency lost the most in a week today after Chinese banking data came worse-than-expected by economists, showing a slide in new lending figures and a disappointing rise for fixed-assets investments, indicating that one of the main global economies may still face further months of recession. The New Zealand dollar as well as its Australian counterpart are considered high-yielding currencies despite the current low interest rates in both countries, and these negative reports in China affected the Aussie and the kiwi today, paring much of last week’s gains versus the yen and the greenback.
Economists affirm that last week’s euphoria stimulated forecasts to be set higher, and the Chinese numbers today frustrated most of traders, which were attracted to refuge currencies like the U.S. dollar and the Japanese yen to provide more safety to their portfolios. The currency market tends to remain very volatile until the global economic conditions remain uncertain, and it is hard to predict what direction high-yielding currencies will take towards the end of the year.
AUD/JPY fell to 80.73 as of 10:54 GMT from a previous rate of 81.70 in the intraday comparison. AUD/USD followed the same trend from 0.8417 to a current price of 0.8363.

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Canadian Dollar Down as Oil Declines

The Canadian dollar had a second day of negative performance as unemployment in the nation is expected to grow further, damping demand for the loonie.
After several days breaking records versus its U.S. counterpart, the perfect scenario for a reversal in the Canadian dollar trend occurred today, as stocks and commodities fell, influencing negatively the loonie’s performance. Reports due tomorrow are likely to indicated improved employed conditions in the U.S., speculations which helped the greenback to pare some of its latest losses versus the loonie.
USD/CAD traded at 1.0770 as of 22:41 GMT from yesterday’s rate of 1.0700.

Brazilian Real Falls on Commodities Decline

Brazil’s real, the best performing among the 16 most traded currencies had the most significant fall in more than a month as commodities declined today, pushing investors away from the South American currency.
A number of important Brazilian exports had a decline in their prices today as U.S. services industries contracted, forcing virtually all commodities down today. Brazil is one of the biggest global supplies for grain and metallic commodities, and today’s decline brought the real to the first negative performance in a week.
USD/BRL traded at 1.8255 as of 22:21 GMT from an opening price of 1.8141.

Pound Continues Rally Versus Euro and Dollar

The pound is gaining again versus the euro and the dollar as services industry grew and U.K manufacturing jump beyond expectations in July, pushing the pound to the highest level in 9 months.
The pound sterling may be climbing its way to pre-crisis levels as positive news for the British economy appeared this week after months of consecutive shrinking numbers and political crisis in the British Isles. Today the pound is trading at the highest level in 9 months versus the greenback and the highest in one month versus the euro, fueled by British reports this week that indicated an increase in U.K. manufacturing and services industry figures, helping the pound to widen the gap versus the euro and rebound versus most of the 16 most traded currencies, losing only to extremely high-yielding options, like the Brazilian real.
Analysts affirm that the economic recovery in the U.K. is proving to be happening faster than in other parts of the Europe, which is boosting demand for the pound, and raising attractiveness for equities markets in London. If positive news continue to come in the U.K. it is likely that a rebound pattern will be set for the pound, which is likely to gain mostly versus the greenback and yen, considered refuge currencies and unattractive for the current economic scenario.
GBP/USD traded at 1.7016 as of 11:11 GMT from 1.6953 in the intraday comparison, being the current, the highest rate since last December.

Finance Minister Halts Canadian Dollar Rally

The Canadian dollar, which has gaining heavily versus several most traded currencies, finally stopped its rally after the national Finance Minister affirmed that eventual measures may be taken to damp the rising demand for the loonie, which is already jeopardizing Canadian exports.
The Canadian currency was one of the best performing ones since the world started to post more solid signs of economic recovery last month, creating a bullish pattern for high-yielding currencies fueled by a new wave of risk appetite. The current rise of the loonie, may already affect Canadian exporters negatively, since the national currency rose intensively, more than its Australian and New Zealand counterparts for example. Yesterday, Canadian Finance Minister Jim Flaherty stated that the rapid rise of the national currency is already a reason of concern, and measures may be taken to halt its continuation, affecting immediately the Canadian dollar, which dropped from a 10-month high level.
Analysts examine the loonie’s short term situation as an obstacle for Canada to grow, since a high loonie will affect Canadian’s exports and consequently different sectors of the economy. The Bank of Canada may indeed intervene in the currency market, being Flaherty’s declaration already an effective psychological measure that pushed the dollar down for the first time in a almost a week.
USD/CAD traded at 1.0763 as of 10:21 GMT from yesterday’s rate of 1.0681.

Yen Rebounds on Stocks Correction Movement

After gaining sharply for three days in a row, today stocks declined around the world, fueling demand and opening a profit opportunity with the currently weakened Japanese currency, which is witnessing its first significant climb in a week.
Today, Bayerische Motoren Werke AG, commonly known to the public as the BMW vehicle manufacturer, posted a 76 percent decline in its profits, causing European stock markets to open in the negative, consequently attracting stock traders to safer positions like those available in refuge currencies, benefiting the yen. In Europe, a report is likely to indicate that producer prices declined at a strong pace, damping demand for the European common currency. Emergent-market currencies like the South African rand, and Commodity-linked currencies like the Australian dollar, posted the sharpest losses versus the yen, as these currencies tend to have a higher volatility due to their riskier profile.
Analysts indicate today’s movement as a correction, and also a pause in the current rally that higher-yielding currencies are imposing versus the yen. A number of traders are selling their positions in emergent-markets to take profits from last week’s rally, but it does not mean that the yen is starting a recovering pattern, the outlook for the Japanese currency still remains very negative.
GBP/JPY traded at 160.29 as of 9:53 after topping at 162.17 hours earlier. EUR/JPY traded at 136.11 from 137.69.

Canadian Dollar Climbs Fueled By Stocks Rally

The Canadian dollar reached a 10-month high versus its U.S. counterpart as corporate earnings, mainly in North America, but also in Asia and Europe, posted better-than-expected numbers, pushing investors to the already attractive Canadian currency.
The crude oil price rally during the past weeks has been favoring the Canadian dollar massively, since one of the main national exports to the U.S. is the oil, which experiences an increase on its price as demand for energy tends to grow in a recovering economy. Corporate earnings this week in the U.S. and Asia helped high-yielding currencies to gain even further, as the greenback and the yen tumbled to the lowest levels in more than a year. Manufacturing in China figures published yesterday, indicated the highest climb in a year, suggesting that the Asian nation is also being helped by global signs of economic recovery, as a higher demand influences its industrial production.
Analysts state that equities market gains have still a reasonable range to continue, and that the Canadian dollar is very likely to follow these movements. The crude oil may also help the Canadian dollar to climb, and it is not impossible that the loonie will be traded one-to-one versus its U.S. counterpart before the end of the year.
USD/CAD traded at 1.0697 as of 9:13 GMT from a previous rate yesterday of 1.0780.

Euro Climbs on U.S. Data Speculations

The euro has been trading near a two-month high versus the dollar during most of the past week, and may climb to higher levels today on a U.S. manufacturing report that is likely to show the highest production in a twelve-month period, raising risk appetite among investors and affecting the greenback negatively.
The dollar is losing constantly versus the Eurozone currency since the global economy has been posting more solid signs of recovery, three weeks ago, which is helping the euro outlook to climb as its riskier profile, compared to the dollar, is luring investors back to European equities markets, consequently pushing the bloc’s currency up. The euro also climbed versus the yen, as former Federal Reserve Governor Alan Greenspan stated that the economic recovery may come earlier than expected, which affected negatively the yen, being the latter a refuge currency for stormy financial markets periods.
According to analysts, the euro is climbing mostly versus refuge currencies, but against other higher-yielding options, it continues rather stable. A very strong euro is not seen positively in Europe, as the region exports are affected in competitiveness by a stronger currency, nevertheless, the euro is liked to continue its rally versus the greenback and the yen.
EUR/USD traded at 1.4285 as of 11:08 GMT from an equal opening rate around the 1.4300 level. EUR/JPY traded at 135.63 from 135.19.

Manufacturing Report Keeps U.S. Dollar Under Pressure

The U.S. dollar started another week with optimism weighing negatively on its outlook, as a report is likely to indicate the highest manufacturing level in the United States in almost a year, attracting investors to higher-yielding currencies.
The U.S. dollar is posting losses versus its Canadian and Australian counterparts today after former Federal Reserve Governor Alan Greenspan said that the worst recession in decades is likely to be ending, decreasing attractiveness for the safety profile of the greenback, and attracting investors to yield. The Dollar Index was near this year’s low before a U.S. manufacturing report which is likely to reach the highest levels this year, rectifying evidences that the global slump is becoming a surpassed event, bringing investors to equities markets and emergent countries currencies. In Asia, currencies were favored by a report in the end of last week showing that South Korea grew at the fastest pace in six years.
The world is showing multiple signs of recovery, this time steadily, and this is dollar-negative, according to specialists. Oddly enough, favorable news in the U.S. economy are being interpreted as a sign of global economic recovery, pushing the dollar down, even if the nation’s economy is recovering.
USD/CAD fell to 1.0730 as of 10:15 GMT from an opening rate yesterday of 1.0775. EUR/USD is being traded at 2-month high levels at 1.4286 after topping at 1.4310 hours earlier.

Forex News Trading

Traders on the Foreign Exchange market, Forex market for short, can potentially make thousands of dollars based on the volatility and fluctuations of a country’s currency. To better themselves and have a leading advantage over other traders, some Forex traders and investors participate in a practice known as news trading. The risks are very high, but the potential gains can be worth thousands of dollars and many traders and investors use this technique.
The technique of news trading is quite simple. It is the trading of foreign currency immediately before or after an important economic news announcement. After such announcements, there is a high possibility that market prices will fluctuate, either for the better or worse, depending on the announcement. For example, if the U. S. Federal Reserve announces another increase of the interest rate, many traders might invest in the U.S. dollar as it is expected that its value will appreciate. The main advantage of news trading is the potential for a country’s currency to make huge gains or losses in very little time. Within minutes of an economic announcement, a country’s currency can gain or lose one hundred points almost instantly. The potential of huge profits attracts Foreign Exchange traders and investors, however there are various risks associated with news trading.
Like any investment, there is always a risk, and news trading on the Forex market is no different. Though the potential profits are huge, the losses are also equally as large. The dangers of news trading come from the fact that a trade must be made quickly or else you are going to lose. If you are caught on the bad side of a trade, your money will be gone quicker than you can blink your eye. You will lose money so fast that there won’t even be time for you to manually close your trades, leaving you with nothing. Stop-loss orders are also potentially dangerous as there is a high probability of slippage because of the sudden price fluctuation.
Though some investors and traders might get lucky trading news, there is only a small probability that you will make a profit. Even if you are an expert news trader, you should still be very, very cautious when participating in this practice. Successful news trading depends solely on how you get your news. The most successful news traders are the ones with the fastest news feeds and those that are able to quickly place their trades immediately after an announcement has been made. Even using other forms of news trading, such as placing orders above or below the market price is still a guessing game, and those traders in the market who base their trades on guesses, won’t have much money after a short time.
For many Forex traders and investors, their trades are dictated by technical indicators and price indexes. Hours are spent researching every indicator, taking every risk into account and then making a decision based on everything they have studied. However, for a Forex news trader, none of this matter, and the only thing they take into account is economical news announcements.
News trading is possible because the Forex market is always open, unlike many financial markets. In a financial market, securities trades of certain stocks are suspended when an important company announcement is being made. These announcements are usually made after the market has closed for the day. However, because the Foreign Exchange market is open 24 hours, any economic announcement will have direct affects on the currency of that country, and maybe others as well. In the Forex market, there are eight major currencies that are traded, as well as over seventeen derivatives to be traded as well. This means that on any given day, there will always be economic announcements from any of the major traded currencies. The major trader currencies are as follows:
U.S. Dollar (USD)
Great British Pound (GBP)
Euro (EUR)
Japanese Yen (JPY)
Australian Dollar (AUD)
Swiss Franc (CHF)
Canadian Dollar (CAD)
New Zealand Dollar (NZD)
Because of the availability of each currency, currency pairs, and its derivatives, such as USD/JPY, EUR/USD, AUD/USD, as well as several others, each currency can be traded at any given time because these currencies are globally traded.
Any Forex news trader or news investor will have to have the latest most up to the moment news announcements. Even if the news announcements are only a couple of minutes old, this can have devastating effects for any trader who has risked any sum of money. Most news traders like to keep an eagle eye on any news regarding economical activity, but most importantly news dealing with interest rates changes, FOMC rate decisions, retail sales figures, inflation indicators such as the consumer price index (CPI), producer price index (PPI), unemployment figures, industrial production announcements, boost in business and consumer confidence, as well as business sentiment surveys. Manufacturing sector surveys, trade balance release details, and foreign purchases of U.S. Treasuries may also prove useful for a news trader to better make decisions regarding when or when not to trade.
However, it should be remembered that these news announcements can have ranging impacts on a country’s currency, and after an announcement, the volatility of a currency may greatly fluctuate. It is important to take advantage of news that creates movements in volatility that will last for a few minutes or even hours. Trading on the Forex market based solely on news is a difficult and sometimes dangerous practice. However, there are some indicators that can make a news trader’s job easier, such as breakout indicators (Bollinger bands, breakout of a candlestick bar, or a price bar). Research has proved that news announcements can impact a currency’s value quite severely, in some cases it can gain or lose anywhere from 33 pips to 124 pips, opening up the ideal trading opportunity looked for by news traders. If a news trader is able to act quickly enough, even the smallest news release can be turned into a potential profit of thousands of dollars. However, it is important to remember the volatility of such announcements, and although the profits seem endless, the losses can happen too.