Euro Currency Profile (Part II)

By Ahmad Hassam

It was necessary for many countries to hold large amounts of every individual European currency before the coming of Euro. As a result the currency reserves tended towards US Dollar. In 1990s, 65% of the global reserves were in US Dollar.

However, with the introduction of Euro, foreign reserve assets are shifting in favor of Euro. As EU becomes one of the major trading partners for most countries around the world, this trend is expected to continue.

The European Central Bank: Forex traders keenly watch the policy announcements of European Central Bank. The European Central Bank (ECB) comprises the Executive Board and a Governing Council. The Executive Board implements the policies made by the Governing Council. The Executive Board of ECB comprises the president, the vice president and four other members. These individuals along with the governors of the member national banks comprise the Governing Council. ECB is the governing body that determines the monetary policy for the EMU countries.

The policy meetings are biweekly. Although ECB meets biweekly and has the power to change the monetary policy in any of these meeting, it is only expected to do so where an official press conference is scheduled afterwards. New monetary policy decisions are usually taken by a majority vote. The president has the deciding vote in the event of a tie. These policy meeting are very important to watch for professional currency traders as most of the decisions announced in these meetings impact the Euro.

ECB has a strict mandate based on inflation and deficit. So, the EMUs primary objective is price stability and growth. ECB tries to keep the Harmonized Index of Consumer Prices (HICP) below 2% and M3 (money supply) annual growth below 4.5%.

ECB is supposed to coordinate its policy decisions with the respective central banks. You should understand that the ECB and the European System of Central Banks (ESCB) are independent institutions from both national governments and other EU institutions. This operational independence is granted to them as per Article 108 of the Maastricht Treaty. Without this independence, meaningful monetary policy is out of question.

The primary tools the ECB uses to control monetary policy are the Open Market Operations. ECB has at is disposal four categories of open market operations that it can use to manage interest rates, control liquidity and signal monetary policy stance.

Bulk of refinancing for the financial sector is done through these main refinancing operations. These refinancing operations are conducted weekly with a maturity of two weeks. These operations are regular liquidity providing reverse transactions.

Longer term refinancing operations are liquidity providing reverse transactions with a monthly frequency and a maturity of three months. Fine tuning operations are executed on an ad hoc basis with the aim of both managing the liquidity situation in the market and steering interest rates.

Structural operations involve the issuance of debt certificates, reverse transactions and outright transactions. The ECB minimum bid rate is the key policy target for the ECB. It is the level of borrowing that ECB offers to the central banks of its member states.

ECB does not usually have the exchange rate target but can factor in exchange rates in its policy deliberations as exchange rate impacts price stability. Therefore ECB is not constrained from intervening in the forex markets if it believes that inflation is of concern. - 23208

About the Author:

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

Forex And Other Markets (Part II)

By Ahmad Hassam

Take oil as an inflation input and a limiting factor on the overall economic growth. The higher the price of oil, the higher the inflation would be and the slower the economic growth is going to become. The lower the prices of oil, the lower the inflationary pressures are going to become but this is not always true.

We would like to factor changes in the prices of oil into our inflation and growth expectations and then draw conclusions about the course of US Dollar from them. Above all, oil is just one input among many.

Stocks: Almost everyone is familiar with stocks and the stock markets. Stocks are units of ownership rights that get traded on the stock exchanges. You can take stocks as microeconomic securities rising and falling in response to individual corporate results and prospects.

You can think of individual countries as companies and their currencies as stocks that get traded in the global financial markets. Currencies are essentially macroeconomic securities fluctuating in response to wider ranging economic and political developments. There is no intuitive reason that stock market should be related to the forex market. Virtually nowhere else does the forex market serve as the perfect hedge for your investments than in the stock market? If you are a longer term investor who enjoys the long range returns of the stock market but who doesnt enjoy watching your account value drop whenever the stock market cycles through a downturn, you can offset your losses in the Forex market.

There was a boom in the Tokyo Stock Exchange a decade back. Many investors wanted to take part in that boom. But in order to invest in Japanese stocks, they needed Japanese Yen (JPY). Heavy buying pressure on JPY made it appreciate. So sometimes a relationship develops between a stock market and a currency for the time being. However, long term correlation studies bear this out that there is no major relationship between stocks and currencies. Major USD currency pairs and the US equity markets over the last five years have almost zero correlation coefficients. However, the two markets occasionally intersect.

The US stock market may drop on an unexpected hike in the US interest rates while USD may rally on the surprise move. For example, when equity market volatility reaches extraordinary levels like when S&P 500 Index loses 2% in a single day, USD may experience more pressure than it otherwise would have. But there is no guarantee of that.

Bonds: The bond market rules the world. Everything that anyone does in the financial markets anymore is built upon interest-rate analysis. When interest rates are on the rise, at some point, doing business becomes difficult, and when interest rates fall, eventually economic growth is energized.

Financial markets in interest rate futures, Eurodollars, and Treasuries (bills, notes, and bonds) important for all consumers, speculators, economists, bureaucrats, and politicians due to the relationship between rising and falling interest rates.

How can you anticipate the interest rate changes in the market? By following the bonds market! Ten-year T-note yields are the key for setting long-term mortgage rates. By watching this interest rate, you can pinpoint the best entry times for re-mortgaging, relocating, or buying rental property, and you can keep tabs on whether your broker is quoting you a good rate. Both the bond market as well as the forex market reacts to interest rate changes and inflation. Bond or fixed income markets have a more intuitive relationship with the forex markets as both are heavily influenced by the interest rate expectations. However, the short term supply and demand fluctuations interrupt most attempts to establish a viable link between the two markets on a short term basis.

Sometimes, the bond markets more accurately reflect the changes in interest rate expectations with the forex market doing the catch up. At other times, the forex markets react first and fastest to the shifts in the interest rate expectations.

As a forex trader, you definitely need to keep an eye on the yields of the benchmark government bonds of the major currency countries to better monitor the expectations of the interest rate market. Changes in the relative interest rates exert a major influence on forex markets. - 23208

About the Author:

Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in day trading stocks and currencies. Try These 1500 Pips A Day Forex Signals From Heaven. Develop Your Own Forex Trading System!

Currency Trading Sessions

By Ahmad Hassam

The currency pairs that are heavily traded during the Asia Pacific session are USD/JPY, EUR/JPY and AUD/JPY. The financial centers active during the Asia Pacific session are Wellington, Sydney, Tokyo, Hong Kong and Singapore. Currency trading volumes in the Asia Pacific session account for about 21% of the total daily global volume. Most of the transaction involves JPY as Japanese companies are trying to convert Japanese Yen into other currencies in order to do business with the rest of the world.

News and data reports from Australia, New Zealand and Japan are going to be hitting the market during the session. In terms of the move actively traded currency pairs during the Asia Pacific trading session this news and data affects their price action.

The Japanese financial centers are most active during this session so you can get a sense of what the Japanese market is doing based on price movements. Much of the action during this session is focused on the Japanese Yen currency pairs because of the size of the Japanese market and the importance of Japanese data to the market.

European financial centers begin to open up and the market gets to its full swing about midway through the Asian trading day. European financial centers and London represent over 50% of the total global trading volume.

London, Bonn, Paris, Zurich and Geneva are important financial centers that are active during the European trading session. The forex market interest and liquidity is at its peak during the European session The European session overlaps with half of the Asian trading day and half of the North American trading day.

London is the global forex center with the highest volume of foreign exchange transactions. As a result some of the biggest moves and the most active trading takes place in the European currencies (EUR, GBP and CHF) and the euro cross currency pairs (EUR/CHF and EUR/GBP).

The European trading session is the most important for currency traders. EUR/USD is the most heavily traded currency pair. This pair is influenced by the European as well as US economic and political news. The trading volumes are much bigger in the European Session because of the overlap between the North American and European trading sessions. Some of the biggest and most meaningful directional price movements take place during this crossover period.

The North American Session basically comprises New York and Chicago as financial centers. The North American trading session accounts for roughly the same share of the global trading volume as the Asia Pacific market, or about 22% of the daily global trading volume.

The North American morning is when US key economic data are released and the forex market makes many of its significant decisions on the value of USD. Most US data reports are released around 8:30 AM EST with others coming out later at around 9 AM and 10:00 AM EST.

There are some US economic reports that come out at noon or at 2:00 PM EST livening up the New York afternoon market. Canadian economic data reports are also released between 7 and 9 AM EST.

When the European trading session closes, most of the European traders try to close their open positions. The London or European close can bring volatile flurries of activity. London and European financial centers begin to wind down their daily trading operations around noon eastern time each day. The 12 to 15 hours before an important news announcement (i.e. the U.S. FOMC announcement or the U.S. Non-farm payroll) is a low volume time in the market as well because most banks and institutional traders are sitting on the sidelines waiting to see what the news will be. And as we just discussed, lower trading volumes lead to choppy, ranging markets. And again, choppy, ranging markets are one of the best times to scalp and pull pips out of the market.

On most trading days, market liquidity and interest falls off significantly in the New York afternoon this can make for challenging trading conditions. On quiet days, the generally lower market interest typically leads to stagnating price action. - 23208

About the Author:

Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in day trading stocks and currencies. Try These 1500 Pips A Day Forex Signals From Heaven. Know Forex Rebellion!

Online FOREX Trading Course - Learn FOREX Trading

By John Eather

Using an online FOREX trading course can be a lot of help for those just starting out with FOREX trading. FOREX focuses on trading different pairs of currencies and many people have started trading FOREX when it became possible to use the internet for trading. Originally FOREX trader occurred over the phone and this was made difficult by different time zones. Much of FOREX trades were done solely by large financial companies.

There are many different online FOREX trading courses that can be used to provide you information on how to go about using the FOREX markets. There are free resources and other paid services available. You should be careful as many free resources may actually be trying to get you to buy a product or sign up for a subscription.

Before using a course your want to know who is the person that is offering the course and what kind of trading course is it? Courses can come in the form of books, video series or audio lessons.

Many times free trading sites will be offering you just enough information so that once you want more you will need to order a book or get a subscription.

You also may find texts that offer some great training or a specific FOREX trading software may offer its own tutorial or course and by learning how to use the software you learn all about the FOREX market.

The best types of free online FOREX trading courses are those that take the form of article series or advice. Many sites that are dedicated to FOREX will provide you all of the information you will find in a trading course. This information will be unbiased and practical as it can actually be applied to FOREX trading. - 23208

About the Author:

Looking to find the best deal on online forex trading course, then visit www.MoneyMakingFxTrader.com to find the best advice on automated forex trading for you.

Forex Made Easy - Helps Generate More Profits In Forex Trading

By Bart Icles

Regardless whether or not you've already heard of Forex trading and of the stories how many Forex traders became overnight millionaires from making successful deals, Forex trading still is a very risky business venture to go into that could make you lose all your money if you don't know what you're doing, if you don't have the right tools for it and if you aren't well-versed in all its aspects. In order to tip the balance in your favor, you will need to have help in the way of some Forex Made Easy guidelines as listed below.

* It?s only a practical move for anybody to make, especially for those who infuse their money in the business of Forex currency trading, to have all the vital information on it such its basic set up, how the market works and behaves in general, what strategies and methods to employ for all the involved transactions and many other more. This can be achieved through online Forex trading courses offered by many Forex experts and the like, and from schools or universities around the country. By being in the know makes a trader react accordingly to all probable and improbable scenarios, and thus make profits and not losses.

* Practice constantly with paper trading to get a feel for it until you become confident enough and be ready with using the real thing. There are many excellent software programs out there that can help you do this wherein you can try out various Forex strategies and techniques and make money making transactions. Anyone has the ability to make money, as also to lose it quickly in the blink of an eye. So, to prevent this from happening to you, you need to keep practicing constantly until your efforts will become fluid and well executed. *

* Another important thing to remember is to always have a disciplined mind regardless of how every trading transaction turns out; whether profitable or losing deals have transpired, it?s best to stay focused at all times and to stick to the game plan. In currency trading, some people who are in a roll don?t know when to pull the plug until it is already too late. Instead of ending up a sizeable amount of gains, they end up with nothing at all.

Keep these Forex Made Easy guidelines in mind at all times and you?ll soon begin to see some remarkable changes in yourself, as a person and as a trader, and doing business in Forex trading will be most rewarding sooner than expected. - 23208

About the Author:

Finding a good forex brokerage starts with a desire to learn and a drive to become a great trader. But learning online forex trading business takes dedication and a good teacher. But once you learn how to trade and do so successfully your life will change and you have options and financial resources you never had before.