Trading with ForexGen

Foreign exchange brokers, unlike equity brokers, do not take positions for themselves; they only service banks. Their roles are:• bringing together buyers and sellers in the market• optimizing the price they show to their customers• Quickly, accurately, and faithfully executing the traders' orders.The majority of the foreign exchange brokers execute business via phone. The phone lines between brokers and banks are dedicated, or direct, and are usually in-stalled free of charge by the broker. A foreign exchange brokerage firm has direct lines to banks around the world. Most foreign exchange is executed through an open box system a microphone in front of the broker that continuously transmits everything he or she says on the direct phone lines to the speaker boxes in the banks. This way, all banks can hear all the deals being executed. Because of the open box system used by brokers, a trader is able to hear all prices quoted; whether the bid was hit or the offer taken; and the following price. What the trader will not be able to hear is the amounts of particular bids and offers and the names of the banks showing the prices. Prices are anonymous the anonymity of the banks that are trading in the market ensures the market's efficiency, as all banks have a fair chance to trade. Brokers charge a commission that is paid equally by the buyer and the seller. The fees are negotiated on an individual basis by the bank and the brokerage firm.Brokers show their customers the prices made by other customers either two-way prices or one way prices from his or her customers. Traders show different prices because they "read" the market differently; they have different expectations and different interests. A broker who has more than one price on one or both sides will automatically optimize the price. In other words, the broker will always show the highest bid and the lowest offer. Therefore, the market has access to the narrowest spread possible. Fundamental and technical analyses are used for forecasting the future direction of the currency trading. A trader might test the market by hitting a bid for a small amount to see if there is any reaction. Brokers cannot be forced into taking a principal's role if the name switch takes longer than anticipated. Another advantage of the brokers' market is that brokers might provide a broader selection of banks to their customers. Some European and Asian banks have overnight desks so their orders are usually placed with brokers who can deal with the American banks, adding to the liquidity of the market.

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The euro edged higher against the dollar

The euro edged higher against the dollar on Wednesday due to some short-covering following the euro's fall to a six-month low the previous day.
Some stop-loss buying of euro and buying by CTA funds gave a lift to the single European currency, which slid on Tuesday after data showed German business morale had fallen to a three-year low.
The data was the latest sign that weakness in the U.S. economy had spilled over into other major economies, and underscored market expectations for the European Central Bank to eventually lower interest rates.
The euro rose around 0.5 % to USD 1.4730, pulling away from a six-month low of USD 1.4570 hit on trading platform EBS on Tuesday.
The dollar dipped broadly, with sterling rising around 0.4 % to USD 1.8445, pulling up from a two-year low of USD 1.8330 hit on Tuesday.

American Time Zone | ForexGen

U.S. equities
Most U.S. stocks advanced as a rally in energy shares overshadowed concern the Federal Reserve will raise borrowing costs to slow inflation.
Anadarko Petroleum Corp. jumped 6.3 % and led gains in 32 of 39 energy producers in the Standard & Poor's 500 Index as crude climbed more than USD 1 a barrel.

USD at six month high
The dollar rose to a six-month high of 1.4570 against the euro on speculation the greenback will be the main beneficiary of a global economic slowdown as German business confidence dropped in August more than forecast.
The minutes from the latest FOMC meeting showed that the Federal Reserve policy makers agreed this month that their next change in interest rates will be to raise them, while reaching no conclusion on the timing of such a decision.

German IFO Pummels Euro, Boosts Dollar | ForexGen

U.S. Dollar Trading (USD) gained again during the Asian session this time lead by the Antipodean currencies AUD and NZD. Weak EU data allowed new multimonth highs against most currencies except the Yen which outperformed as banking worries continued. Gains in Oil as a hurricane formed off the Gulf Coast pared some of USD gains. US data was mixed with a rise in CB Consumer Confidence to 56.9(53 Expected) for August being offset by a fall in New Home Sales for July to 515K (530K expected). FOMC minutes from last Fed meeting also released but offered little new to the debate over future rate movements. In the U.S. share markets, the NASDAQ was down 3 points (-0.15%) and the Dow Jones was up 26 points (0.23%). Crude Oil closed up $1.16 ending the New York session at $116.27 per barrel. Looking ahead, July Durable Goods Orders are seen at -0.5% vs. 2% in June. US Crude Inventories are expected to build .9M Barrels.

The Euro (EUR) was on a weak footing as USD strengthened broadly before being knocked lower on weaker than expected data. GFK Consumer Confidence dropped to 1.5 in September vs. 2 expected and Q2 German GDP was confirmed at -0.5%. The big market mover was August IFO Index which fell more than expected to 94.8 vs. the 97.1 forecast. The Euro broke through support at 1.4600 before a rally in Oil allowed some relief. Overall the EUR/USD traded with a low of 1.4570 and a high of 1.4760 before closing the day at 1.4650 in the New York session. Looking ahead, German Import Prices are expected to rise 0.5% in July.

The Japanese Yen (JPY) one of the only currencies to stand up to USD strength gaining against most currencies especially the EUR/JPY which took out option barriers at 160. Ongoing unwinding of carry trades supported gains. Overall the USDJPY traded with a low of 109.14 and a high of 109.94 before closing the day around 109.60 in the New York session.

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News And Views

USD surged on poor German data but trimmed its gains thereafter as oil prices rose and US data were mixed. While US Aug consumer confidence beat consensus, the -15.9% y/y print on June house prices was near expectations and the 515K for new home sales weaker than forecast. NYMEX crude oil dipped below $113/bbl at one point but rallied to sit around $116/bbl in late NY as oil workers began to be evacuated from the Gulf of Mexico as Hurricane Gustav builds strength. US equities posted minimal gains. The New Zealand dollar largely ignored broad USD movement, chopping around 0.6900/40 in London before rallying above 0.6970 on macro account buying.

AUD/USD lost about 25 pips in IFO-related collateral damage but was about flat in the end, sitting at 0.8550 near the NY close.

EUR/USD sank a full cent to 1.4600 on Germany's Aug IFO survey of business sentiment sank to 94.8 from 97.5 vs consensus of 97.2. Buyers emerged below 1.4600 however (low 1.4570) as the pair recovered to 1.4540/50.

USD/JPY was little changed overall at 109.60 late NY but did see a short-lived dip to 109.15.
The minutes of the 5 Aug FOMC meeting showed that members generally agreed that the next move in interest rates would be up, but the timing would depend on economic and financial market developments. As noted in the 5 Aug statement, there was 'significant concern' about inflation, with some members concerned that 'core' inflation may not moderate in 2009 as hoped. However, many officials were also concerned about the potential for more market turmoil, especially in light of the mortgage agencies' recent woes. The statement points to more tough talk on inflation from the Fed, but no action in the near future.