Cable Forex Forecast
Currency Market – Forex 2009
Forex
Contraction of the words of Foreign Exchange, Forex is the nickname given the market universal exchange, where currencies are traded among themselves, exchange rates that vary continuously.
Economic Importance
This world market, which is essentially of exchange is the second largest market in the world in terms of total volume, behind the interest rates. However, the concentrated and the first for the liquidity of most treaties, such as the euro / dollar.
To give an idea of liquidity in circulation, the volume Journal of Commerce in 2004, 1900 million U.S. dollars, as follows:
600 billion of transactions in cash and 1300 million dollars in future almost exclusively on over the counter transactions, according to the study of three years of the Bank for International Settlements (BIS).
transaction volume was 53% for banks;
33% between a bank and a fund manager at a bank or financial institutions;
and, finally, 14% between a bank and a non-financial.
In all banks large traders (traders) are the 3 × 8, though usually in different places. A team based in Asia or Australia happens to another located in Europe and third placed in North America, and so on.
However, despite the global nature and timing of releases between continents, a large (31% volume total, according to BIS), the market activity is still physically located in London.
In its latest triennial review, the BIS (Bank for International) has shown that an increasing number of people choose to invest in the Forex. Although they still represent a very small minority of transactions and volumes a dedicated private investors has grown in parallel. Simply record the number of trading platform available on the Internet, and information tools real time once reserved for professional traders in the rooms. Now, the active trader of foreign exchange market can invest minimum amounts and because there trader has leveraged almost (!) similar to those of the professional trader. Tools for real-time information broadcast news information and fundamental change (Economic indicators) and to give individuals the possibility of trading conditions in real time.
The foreign exchange market has existed in its current form, called system of floating exchange rate since March 1973 and the abandonment of fixed exchange rates of various currencies against the dollar standard of Bretton Woods in 1944.
Treated Products
Place
Cash (named point), the main parities were processed in 2004, according to BIS:
the euro and the dollar – 28%
the dollar / yen – 17%
the pound / dollar (cable, said in English) – 14%
Despite the strong development of the euro, the dollar remains the dominant center, present in 89% of transactions (37% against the euro, the yen 20% and 17% sterling, all on a total 200% because each transaction involves two currencies). For a non-European XXX currency, a transaction between the euro and the currency is usually divided into a EUR / USD and USD XXX /.
Change Term
The term exchange is divided into two products, both Interbank short-term (say openly in English), treaty rather little, and swaps. Unlike other financial markets, futures held never imposed in the currency market and remain marginal.
Exchange options
Finally, the exchange of options market is the more diverse and innovative options markets. He is responsible for virtually all forms of so-called exotic options or second generation (options barrier, Asian options, options on options, etc.)..
Trade and Foreign Currency
Coverage (Coverage)
The principle is to take opposite positions in order to neutralize the risk.
Forecast
This is to anticipate market movements through a more or less advanced financial, economic and political. The advantage to anticipate movements of currency speculation. To this end, several sources of information available to the trader of foreign exchange (Reuters, Telerate, Bloomberg LP) for access to all quotes and financial information for trade. You also have access to economic indicators of major countries and global financial information. It is capable of forming an opinion on the prices or rates and anticipate future movements.
Arbitration
Is to try to exploit the differences price or courses from time to time in the same medium, the same currency on two different markets. The switch can perform these operations on a single market as the field of or more markets and foreign exchange swaps. Powerful tools (called pricers) which allows you to calculate different prices or interest in a transaction arbitration. This strategy requires a response and stress management in real-time operators.
Exchange Rates
Electronic exchange rate exchange rates monnaies.Le a coin (a coin) is the price (ie price) that in relation to another currency. Also known as parity "of a coin."
The exchange rates quoted on the exchange markets, vary continuously, but also vary according to location from the list.
Examples
For example, the dollar exchange rate euro will be observed: EUR / USD = 1.3120 and the dollar will be noted in Yen USD / JPY = 89.4454.
(EUR = Euro, USD = U.S. dollar, the yen JPY =, = GBP pounds sterling by International Monetary encoding, ISO 4217 distinguishes each currency by an abbreviation of three points, cf. The full list)
Exchange rate fixed or floating
The exchange rate of a currency is:
Or the relatively fixed, ie constant reference currency (usually the U.S. dollar or the euro), by decision of the state that issues that currency. The rate can not be changed by a decision of devaluation (or revaluation) of that State. A State may not decide to adopt any change in its currency. If the fixed exchange rate to a level too high or too low, the exchange rate could be "attacked" in the foreign exchange market. If the monetary authorities can not cope (through of its foreign exchange reserves), must change its parity.
Is floating and determined for each transaction by the balance between supply and demand in the market currency. This is a global interbank currency, less centralized budget and trade specific locations, based on links between banks.
The exchange rate:
is a "point", ie "in situ" for immediate purchase and sell currencies. Usually the deadline for delivery foreign currency is less than two days.
Of course it is a striker, "meaning" forward "for currency transactions due to future, more 2 days. The mission is to manage risk. It is today an agreement to fix the price at which buy / sell the currency.
Factors that influence the type exchange:
The exchange rate is determined by supply and demand of both currencies: if demand exceeds supply, price increases.
Since the currency of a country is essentially a claim held by the Central Bank of this country, detention of a foreign currency can be seen as holding a claim to "see" in the country which issued.
In the short term
Exchange rates vary much in one day, these variations can not be explained by the theory of Purchasing Power Parity (PPP) is described above. In this analytical framework short term, it is necessary to refer to other explanations.
These daily changes based on the concept of early return of deposits in foreign currency. The operators determine demand for different currencies depending on the expected profitability of deposits in these currencies.
In long
Recovery rate of the exchange rate euro / dollar since January 1972-January 1999 exchange rate of the French franc or Deutschemark. In the long term coins in theory should be closer to equilibrium exchange rates obtained from structural parameters. Imbalances and, more rarely, balances valuation of currencies are measured on the basis of purchasing power parities (PPP). It is a complex statistical exercise, which is comparable to the time the purchasing power a model of consumption in a country and a wide range of consumer products other than use in a country and a range of consumer goods you want to quit, but that correspond to other local practices in terms of lifestyle and cost structure. In practice, usually the U.S. dollar as a common index and truth every time you compare the purchasing power of a consumer type of country X and that of a typical American consumer.
The purchasing power parity, whether it is for international comparisons of living standards, where margins of error of a few percentage points are not significant, its use in analyzing the foreign exchange market should be done with utmost caution.
Currency crisis
A country will suffer a currency crisis when the capacity to pay the external debt (public and private) denominated in foreign currency of the country is highly in doubt (crisis of confidence). The outflow of capital in the short term after dropping the exchange rate of the currency, making it even harder to return.
The economic role of exchange rates
Exchange rates (and interest rates, which are closely related) are of course the prices of import and export. Have an influence on the direction capital flows between the economic zones.
As a result, countries and economic areas may be tempted to influence exchange rates, often under the pretext of preventing speculation (in fact these manipulations tend to encourage), and in order to improve (lower speed).
Operation Currency markets
Case of the euro / dollar
The exchange rate says euro / dollar is the euro, U.S. dollar figures, therefore, the bar (not to be confused with Eurodollars).
Financial instrument is the active and most went to the world: 27% of total spot transactions. Its value is an indicator not only for monitoring economic and financial circles, but also by the media, both specialized and general, worldwide.
This definition is, in fact, the external value of the euro against the U.S. dollar.
Profession (FX)
Those who carry out foreign exchange transactions are called professional traders.
Banks, in particular, have teams of traders, both to clean up these institutions in the market to meet the changing needs of its customers, for example on business, on international trade. They act as market makers, ie that they are "prices" for a specified amount of series and provide the buying (offer, in English) and ask to whom they sell (in English), for example: 1 EUR = 1.2343 / $ 1.2346.
Round Batch
Traders expressed the unity of the inclusion of an exchange rate in a currency pair at points called points. Pip stands for "point Price of interest "or a" swap "in French. First, as its name suggests, it meant the unit" off "or" report " the period of change, but ultimately apply to the unity of the market. Refers to the last decimal used: in the case of euro, the fourth decimal place. A list three "pipes", which is standard in the interbank market of the euro / dollar in the first example (EUR / USD = 1.3120) of paragraph 1 above: EUR / USD = 1.3120 (bid) / 1.3123 (ask). It is a spread of three points in the case of the yen, which will be the second decimal, and a list of four "pips" will once again the previous example, USD / JPY 89.4454 = (supply) / 89.4654 (ask).
The bone represents a different percentage and not fixed for each parity. This difference depends on the currency in which we choose by convention to express the exchange rate (the "uncertainty" of the comparison), the other being taken per unit of product (the "true"), including the number of decimals.
These differences between the current "buyer" and "seller" of one currency against another are much less than one person can see when they want to make a currency transaction in an exchange of pharmacy (or bank) for a modest amount.
In the first case, the percentage (minimum) to a foreign currency in the currency of 100 000 euros (the standard operation is not in the tens of millions), it is noted that for this amount of seed exchanged is $ 10. In the second example, the exchange rate of 100 000 dollars per pip for that amount is 1000 yen (about U.S. $ 9).
European exchange rate mechanism
The exchange rate mechanism in Europe, or MTC, is a type of mechanism exchange rate established by the European Community in 1979 to statibiliser prices of European currencies, to prevent risks and increase confidence in the currency in the medium and long term inflation and promoting trade and activity in intra-EU trade.
Originally called "European Monetary System", was revised considerably in performance by the Maastricht Treaty was ratified in 1992 by the European Union in preparation for economic and monetary union and single currency.
Since the introduction of the euro on January 1, 1999, was revised and replaced by the ERM II and is an agreement between the ECOFIN Council, which brings together all member countries European Union, the European Central Bank and the banks of the central banks of Member States of the European Union outside the euro area.
MTC II
For Member States not participating in the single European currency, a mechanism for exchange of second category in Europe, said the ERM II, was launched. During the negotiation of the Maastricht Treaty by the 12 EU members and three new buyers (Finland, Sweden and Austria), was hoped that all members of the previous MTC all new members to the Union must in EMU (if applicable) or ERM II. MTC is over, but Sweden (despite his signing of the Treaty) and the United Kingdom (which has decided to retire, but was not allowed to) have not joined the ERM II. These exceptions are no longer permitted for new candidate countries, they must first accept the convergence of their economies and participation in ERM II (and the EMU as soon as conditions are met) with a timetable established by the Treaty of Accession.
ERM II is based on the euro only, ie the common unit of the only countries which joined the euro (and not on the unit that was calculated for all European Union currencies) and a tolerance of 15% around an initial exchange rate of the currency and the euro. This reduction of the basis for determining exchange rates from the outside also should help stabilize the budget and distribute more equitably. However, this reduction in the base including a hazard for setting this budget, if underdeveloped countries join the European euro. This was not the case, and almost all European Union countries have joined since the launch of the euro, which helped end while the ECU and therefore also in the MTC (at least formally, some financial institutions have been calculated until 2001, as an index, but given the weight of the euro in the basket of old coins, though the composition of the euro has changed since then, and methods calculation of contributions to the EU budget).
Since the introduction of the euro on January 1, 1999, parity between the euro and national currencies of the countries members joining the euro was fixed and irrevocable. Other countries have ratified the Treaty of Maastricht (or its successor) have committed to converge their economies in order to avoid economic distortions associated with its exchange rate, not to resort to devaluation, let the market set the price of its currency in terms of their economic performance. To achieve and maintain stable exchange rates around an axis defined by membership in ERM II, the maximum fluctuation of ± 15%, which pursue a common policy economic convergence criteria, and sound management of public finances in the short to long term.
These criteria are assessed by the Council of Ministers Union Finance, ECOFIN, in collaboration with the European Central Bank and national central banks of EMU members. If the criteria of economic convergence are met for a minimum period of two years, participants receive the approval of the Council of Economy and Finance to enter the euro and the national central banks (NCBs) can adhere to the ECB and, finally, when this integration is achieved (with the submission of the signatures of the instruments of ratification and financial conditions, approval of the representatives of the NCBs and the money to convert and guarantee funds revenues deposited in the ECB), the ECB decided in accordance with the ECOFIN Council irrevocable conversion rate between its currency and the euro, taking into account the recent fixations official foreign markets and adjustments based on assets and financial commitments NCB's international commitment to closing.
All countries aspiring to join the euro must first subscribe to the ERM II. This was the case in Greece in 2000 and 2001 before joining the euro. This is already the case of Estonia, Lithuania, Latvia, Malta and Cyprus, and in Slovakia from November 2005. By integrating euro area, Slovenia joined ERM II on January 1, 2007.
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Forex Trading Tips: EUR/USD Forecast