Currency Rates Archive

How the Forex rates are determined

Forex trading is a very exciting investment activity, especially for Tradeforex users who enjoy learning more about world economic conditions.  There are several unique aspects that determine what prices the various currencies of the world trade at.  Understanding a little more about these different factors helps make price analysis much easier.

Many traders do not realise that there are trading algorithms that play a role in the process.  This is sometimes known as robot or computer trading.  As the market for Forex trades grows, electronic trading will play a larger role in prices.  Investors who use technical analysis will especially benefit from this.

The political situation in a country often has an influence on currency prices.  When there is a period of economic unrest in a particular country, this typically has a negative impact on its currency.  Those who prefer fundamental analysis make it a point to study the economic factors in order to better predict when this may possibly affect prices.

The economic situation in a country also plays a major role.  Detailed economic reports provide valuable insights into what is going on in a country economically.  Traders who have a solid knowledge of economics will also be able to make good choices based on indicators.  Like political factors, economic factors often have a role in whether prices rise or fall.

When traders look at all these factors overall, it is quite easy to see how variations in rates occur.  Understanding all of the different factors that influence the rates makes it easier for wise investors to make accurate predictions.  There is no single method to predict whether a currency’s price will rise or fall in a given day.  However, good analysis methods always make things far easier for traders, no matter what their experience level.  This combination of factors should always be carefully assessed.

Dollar Slumps against Yen

Currency markets can react to comments from officials of central banks and it is no surprise that the markets did just that, following on from remarks that have been made by Fed Chairman Ben Bernanke, about potential tapering of the Fed’s bond-buying program.

Similar reaction has been seen in the stock markets to this, as well as concerns over the Chinese economy, which triggered a huge global sell-off, with the FTSE 100 falling from its highest level in thirteen years. London’s blue-chip shares dropped 143.48 points, or 2.1pc, to 6,696.79. The FTSE 250 saw falls which were just as great and these plunged 316.42 points to 14,507.72, a 2.1pc loss, knocking the index from a record high.

The dollar fell sharply against the yen on Thursday and at the close of the U.S. session USD/JPY had fallen 1.24 percent to 101.88. The euro extended gains against the dollar with EUR/USD closing up 0.68% to 1.2947. Following on from some unexpected poor retail figures, which included a drop of 4.1pc plunge in food sales reported as the worst for two years, the Pound fell by 0.5% against the dollar to the lowest point since April to $1.5083.

Aussie Dollar at 11 month low

The Australian Dollar has fallen to a low which it has not seen in eleven months, this is in spite of reported record highs in the US S&P 500, so will it fall further and what could be the reason for the fall?

We have seen that the Australian Dollar has consistently performed as the highest short-term deposit rates of any G10 currency since Q2, 2009, surprising to many, this also roughly lines up with a substantial AUDUSD and S&P 500 low. Could this be as a result of those seeking higher risk unloading safer assets in favour of the higher risk, with of course a higher return, S&P stock and putting their money into Australian Dollar as opposed to the historical safe haven, but low yielding, US Dollar.

Experts are saying that despite the recent falls the Australian Dollar is still overvalued and further fall can only be expected simply because prices, pretty much across the board in Australia, are way too high. Items in Australia are more expensive than similar items found in other countries, due to the overpriced Australian dollar.

Picture: Doug from the UK

We are ruled by dollars all over the world

The strongest currencies in the world at present appear to be dollars, Australia, New Zealand, Canada and of course the US dollar. Much of this of course is due to the weak pound and also the Euro is underperforming too. Other countries do not seem to have suffered in quite the same way as ourselves and Europe, pulling themselves up from the global financial crisis quicker and more effectively.

All the countries using the dollar are English speaking of course, but that is where the similarities end, it is the price of commodities that they have and of course we must not forget that their banking systems were not almost wiped out.

Take Australia, many experts believe that the Australian dollar is well overvalued, when you consider that he pound has fallen by around 100 cents in the period from 2008. Many analysts consider that the New Zealand dollar is also overpriced, as much as 15% in some quarters, but it continues to hold its price; it is likely to go higher.

The Canadian dollar continues to strengthen and experts are agreed that the Canadian banking system is the most robust in the world, it is also closely aligned with its neighbour the US and the USD continues to set the benchmark against which other currencies are judged.

Picture: 401(K) 2013

Is a demo account the right way to get started in Forex trading?

The majority of newbie Forex traders probably learn the tricks of the trade by first signing up for a demo Forex trading account.  In this way, they do not have to lay out any money upfront and they get an opportunity to make mistakes without paying for them.

There is a relatively small group of traders who do not believe that a forex demo account is the way to go.  These traders believe that one simply does not make the same type of decision when you are dealing with ‘paper’ money instead of real money.

While this group might have some valid arguments, in our view the value of demo accounts has been proven again and again.  If it was not for demo accounts, one could safely say that many successful traders of today would never have reached that level because they would have wiped out their trading accounts during the early stages of trading.

There is, however, a right way and a wrong way to use a demo account.  While such an account allows a novice trader to try out various trading strategies, it would be of little use if such a trader did not keep a record of all his or her trades, and studied them afterwards to try and determine where mistakes were made.

It is, therefore, important to try one strategy at a time and do it consistently for a while.  Make a note of the outcome of all trades and adapt your strategy where necessary.

Euro Weakness Forces Swiss to intervene

With the EUR/CHF falling below 1.21 the Swiss National Bank resumed intervening in trading and as a result its foreign currency reserves were raised by the largest amount in six months. The President of the bank reported in February that he did not expect the bank would not have to continue to buy foreign currencies as it was expected that the Swiss Franc would naturally continue to depreciate with the Euro-zone recovery.

This has proved not to be accurate and signs of the recovery are stalling, which has meant that sellers began to look for a safe haven and the Swiss Franc was the option chosen by many, this has forced the Swiss Bank back to the Forex markets. The result of this intervention has meant that the Euro has risen towards 1.2170 against the Franc although resistance could be provided at a figure of 1.2180.

In 2012 the Swiss Bank spent 188 billion Francs in 2012 to enforce the cap on its currency, and this sum amounted to the equivalent of nearly one third of the Swiss GDP.

Weekly technicals- Spot forex- 1st- 6th April 2013

EUR/USD- Previous week- 1.2971 1.3048 1.2750 1.2818 -0.0167 -1.28%

EURUSD

Supports- 1.2800 1.2675 1.2575
Resistances- 1.2875 1.2960 1.3040
Price range: USD 1.2575-1.3050

Trading Call –

EURO ended the week with losses of 1.28%, versus the greenback, extending its decline to close at the lowest level since the mid of November, 2012.
The pair failed to close above crucial near- term resistances placed at $1.3040- 1.3075; top end of the near- term bearish channel although it did attempt to rally beyond these resistances on a couple of occasions.
Only a close above will ensure the start of a near- term bull- run with immediate targets of $1.3175 followed by $1.3300

Crucial supports placed at $1.2800 and a close below, we could see the pair attempting to test the November lows of $1.2650- 1.2675.
The trend remains weak and ONLY a close above $1.3075 would negate this view

Short, medium- term trend- Bearish; Long- term trend- Bullish
Hold on to short EURO  positions initiated at $1.2800 with a stop at $1.2875 for a profit target of $1.2700

Long EUR/USD-
At $1.2675 with a stop at $1.2625 for a profit target of $1.2850.
At $1.2850 with a stop at $1.2800 for a profit target of $1.3000

GBP/USD- Previous week- 1.5230 1.5267 1.5092 1.5201 -0.0028 -0.18%

GBPUSD

Supports- 1.5160 1.5040 1.4850
Resistances- 1.5300 1.5425 1.5600
Price range- USD 1.4850- 1.5300

Trading Call –

Pound Sterling ended the week with losses of 0.18%, versus the greenback, slipping last week after closing the previous two weeks with gains.

The pair is inching towards crucial resistances at $1.5300, which could very well be the near- term upside for Sterling and ONLY a close above which a fresh rally with targets of $1.5600- 1.5800 would take off.
Crucial supports are placed at $1.5040- 1.5060, close below which, Sterling could skid to $1.4750- 1.4850.
Targets for the bullish candlestick reversal pattern at $1.5200- 1.5300 are almost achieved.
Short the pair on rallies up- to $1.5300 or below $1.5000

Short term trend – Bullish; Medium and long term trend – Bearish
Short Sterling-
At $1.5290 with a stop loss at $1. 5350 for a profit target of $1.5150.
At $1.4980 with a stop loss at $1. 5050 for a profit target of $1.4850.
Long Sterling-
At $1.5350 with a stop loss at $1. 5290 for a profit target of $1.5450.

 

USD/JPY- Previous week- 94.31 94.96 93.53 94.19 -0.31 -0.32%

USDJPY

Supports- 93.75 93.25 92.00
Resistances- 94.75 95.25 96.00
Price range- ¥93.75- 96.50

Trading Call –

The greenback ended the week with losses of 0.32%, versus the Japanese yen, extending its decline for the third week in a row.
The pair remained very subtle during the week, trading in a very narrow 140- pips range, after witnessing heavy volatility during the previous few weeks.

Crucial supports are placed at ¥93.75- 94.00. As long as the pair does not close below, the near- term trend remains bullish. Close below and the pair could slide to ¥92.00- 92.25.

Major resistances at ¥94.75- 95.25, close above which, the pair could rally ¥96.00- 96.50 followed by ¥98.50- 99.50.

In the near- term, the trend remains bullish with targets of ¥96.00- 96.50. However, a close below ¥93.75- 94.00 could negate this view

Near, medium term trend – Bullish; Long term trend – Bearish
Long US dollar-
At ¥93.75 with a stop at ¥93.25 for a profit target of ¥96.00.
Short US dollar-
At ¥93.25 with a stop at ¥93.90 for a profit target of ¥92.00

 

Pls. Note: Uncertain volatility can result in losses on profitable positions. Kindly place trailing stop losses if the trades are profitable by more than 50% from the initiated value.

Weekly technicals- Spot forex- 25th- 30th March 2013

EUR/USD- Previous week- 1.2997 1.3008 1.2843 1.2985 -0.0089 -0.68%

EURUSD

Supports- 1.2975 1.2850 1.2675
Resistances- 1.3010 1.3060 1.3175
Price range: USD 1.2950- 1.3300

Trading Call –

EURO ended the week with losses of 0.68%, versus the greenback, extending its losses to a 4- month low, before pulling back to close more than a percent higher from the lows.

The pair remains at the cross- roads with crucial near- term resistances placed at $1.3010- 1.3060; top end of the near- term bearish channel and a close above which the pair could rally to $1.3175- 1.3300.

Crucial supports placed at $1.2975, close below which the pair can quickly slide to $1.2850; lows of the previous week, followed by $1.2675. As long as EURO does not close below $1.2975, the bull- run to $1.3175- 1.3300 is very much in place.

Short- term trend- Bearish; Medium and long- term trend- Bullish          
Short EURO-
At $1.2800 with a stop at $1.2875 for a profit target of $1.2700
At $1.3050 with a stop at $1.3075 for a profit target of $1.2875
Long EUR/USD
At 1.3075 with a stop at $1.3000 for a profit target of $1.3175.
At $1.2850 with a stop at $1.2800 for a profit target of $1.3000.

 

GBP/USD- Previous week- 1.5112 1.5247 1.5025 1.5229 0.0116 0.77%

GBPUSD

Supports- 1.5140 1.5000 1.4850
Resistances- 1.5300 1.5430 1.5600
Price range- USD 1.5000- 1.5300

Trading Call –

Pound Sterling ended the week with gains of 0.77%, versus the greenback, extending its gains from the previous week to close the second successive week with gains.

Sterling started the week on a very sedate note versus the greenback, with the pair moving in a very narrow range and ended the first three sessions of the week, very flat. It was only during the latter half of the week that the pair regained momentum and ended the last two sessions of the week with decent gains.

The pair could extend its gains to $1.5300 levels in the near- term, close above which, a fresh rally with targets of $1.5600- 1.5800 would begin.

Crucial supports placed at $1.5000, close below which, Sterling could skid to $1.4750- 1.4850.

The bullish candlestick reversal pattern with targets of $1.5200- 1.5300 remains intact.

Short term trend- Bullish; Medium and long term trend- Bearish
Short Sterling-
At $1.5300 with a stop loss at $1. 5350 for a profit target of $1.5150.
Long Sterling-
At $1.5350 with a stop loss at $1. 5290 for a profit target of $1.5450.

 

USD/JPY- Previous week- 94.10 96.13 94.03 94.50 -0.74 -0.77%

USDJPY

Supports- 94.30 94 92.50
Resistances- 94.80 96.6 98.50
Price range- ¥94.00- 98.50

Trading Call –

The greenback ended the week with losses of 0.77%, versus the Japanese yen, extending its weakness for the second consecutive week.

The pair began the week with a gap- down of almost a percent and a half, recovered quickly during the next couple of sessions before giving up most of its gains during the latter part of the week.

Crucial supports placed at ¥94.00- 94.30. As long as the pair does not close below, the near- term trend remains bullish. Close below ¥94.00 and the pair could slide to ¥92.25- 92.50.

Major resistances at ¥94.80 followed by ¥96.60, close above which the pair could rally all the way to ¥98.50- 99.50.

In the immediate term, the trend remains bullish with near- term targets of ¥96.00- 96.50. However, a close below ¥94.00 could negate this view.

Near, medium term trend- Bullish; Long term trend- Bearish
Short US dollar-
At ¥93.40 with a stop at ¥94.10 for a profit target of ¥92.50
Hold on to long positions initiated at ¥94.30 with a stop loss at ¥93.70 for a profit target of ¥96.00.

Pls. Note: Uncertain volatility can result in losses on profitable positions. Kindly place trailing stop losses if the trades are profitable by more than 50% from the initiated value.

A busy FX week

It has certainly been a busy week in the currency markets and a lot of movement has be apparent. The problems ongoing in Cyprus has meant that the Eurozone is facing the starkest threat of a member exiting the monetary union since the region’s debt crisis began nearly three years ago. Following on for dealing with the recues that took place for Greece, Ireland, Portugal and Spain; Cyprus is causing particular concern nerves because it adds to the issues that we all remember which harassed the Greek government. Representing only 0.2 percent of the region’s total GDP, but worryingly has a banking sector that was far too large for its economy, the Eurozone is losing patience.

With very little time left for the nation’s banks ATM withdrawals have been very restrictive if working at all and are being limited to just €260. Cyprus has very few hours left to come up with a solution to raise the necessary cash€3.5 billion, otherwise the ECB is withdrawing its offer and Cyprus faces certain bankruptcy. Russia is a big player in the whole of this and many are blaming heavy deposits by Russians’ for the banking problems and Cyprus.

Meanwhile Cyprus remains in talks with Russia to raise the EUR 5.8B need in securing the EUR 10.0B bailout. We may see the EU make an attempt to buy more time if the country fails to meet the deadline set by the European Central Bank (ECB).

Weekly technicals- Spot forex- 18th-24th March 2013

EUR/USD- Previous week- 1.2997 1.3107 1.2910 1.3074 0.0070 0.54%

EURUSD

Supports- 1.3000 1.2960 1.2880
Resistances- 1.3100 1.3175 1.33
Price range: USD 1.2950- 1.3300

Trading Call –

EURO ended the week with gains of 0.54%, versus the greenback, recording its first weekly gain, after closing the previous five weeks in the negative, with losses exceeding 4.5%.

The gains could extend to 1.3150- 1.3175, followed by 1.3300 in the near- term.

Crucial supports placed at 1.3000, followed by 1.2880- 1.2960 and as long as EURO does not close below these supports, the near- term bullish trend is very much in place.

In chart patterns, EUR/USD formed a bullish candlestick reversal pattern last week, with immediate targets of 1.3150 -1.3175 followed by 1.3300.
Leading indicators are also suggesting further gains in the EURO.

Short, medium and long- term trend- Bullish
Hold on to long EUR/USD positions initiated at $1.2975 with a trailing stop at $1.3050 for a profit target of $1.3150.
At $1.2975 with a stop at $1.2900 for a profit target of $1.3150
Short EURO-
At $1.2875 with a stop at $1.2925 for a profit target of $1.2775

 

GBP/USD- Previous week- 1.4915 1.5176 1.4829 1.5113 0.0198 1.32%

GBPUSD

Supports- 1.5000 1.4850 1.4750
Resistances- 1.5140 1.5200 1.5290
Price range- USD 1.4830- 1.5300

Trading Call –

Pound Sterling ended the week with gains of 1.32%, versus the greenback. The UK currency pulled back sharply during the second half of the week after slipping to a fresh 33- month low versus the US dollar. Close above $1.5140, Sterling could extend its gains to $1.5200- 1.5290 before we could see some profit booking creeping in.

Crucial supports placed at $1.5000, close below which, Sterling could skid to $1.4850, lows of the previous week. However, expecting the pair to extend its gains close to $1.5300 levels in the near- term.

In chart patterns, GBP/USD too formed a bullish candlestick reversal pattern last week, with immediate targets of 1.5200 followed by 1.5290.
Leading indicators are also suggesting further gains in the Sterling

Short term trend – Bullish; Medium and long term trend – Bearish
Short Sterling-
At $1.5300 with a stop loss at $1. 5350 for a profit target of $1.5150.
Long Sterling-
At $1.5000 with a stop loss at $1. 4950 for a profit target of $1.5150.

 

USD/JPY- Previous week- 95.95 96.71 95.06 95.24 -0.78 -0.81%

USDJPY

Supports- 94.8 94 93.6
Resistances- 95.6 96.6 98.3
Price range- ¥93.60- 98.50

Trading Call –

The greenback ended the week with losses of 0.81%, versus the Japanese yen. The US dollar slipped on Friday, after a very range- bound week, during which the pair was seen trading in a narrow ¥95.60- 96.60 range.

If the pair bounces back sharply and  closes above ¥95.60 on Monday, we could see the pair going all the way to ¥98.30- 98.60.

However, if the pair fails to close above ¥95.60 on Monday, we could see the pair slide to ¥94.00- 94.80 and possibly ¥93.60, before a pullback.

Near, medium term trend- Bullish
Long term trend- Bearish

Long USD/JPY
At ¥96.20 with a stop loss at ¥95.50 for a profit target of ¥98.00.
At ¥94.30 with a stop loss at ¥93.70 for a profit target of ¥98.00.