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October 22, 2006
Forex News

Anyone involved in Forex trading knows that the media can have a significant effect on the dynamics of the foreign exchange markets. Newcomers to Forex trading need to understand this phenomenon in order to become successful traders. The British pound advanced on Tuesday, October 17, 2006 after inflation data in the UK supported the media-driven belief that the Bank of England will seek to increase interest rates in November. While analysts said that the data was more correctly supported by the falling oil prices and headline-grapping numbers about inflation merely masked the truth, the Forex news of this anticipated increase affected the Forex trading of the British pound.

While the US dollar showed little movement in spite of a drop in manufacturing production and a rise in capital inflow, the pound had moved 0.5% higher against the dollar and 0.4% higher against the euro. Although some analysts discounted the Forex news and its effect on Forex trading, this represents a valuable lesson in Forex currency trading for beginners. Forex trading involves anticipating movements of two different currencies, buying when the difference is low, and selling when the difference is high. Because an investor can buy on the margin, such trades can become blockbusters from minimum investments. This anomaly may have been the lack of reaction by short-term traders because of a recent cut in US interest rates; however, the fact remains that independent movement of a currency with regards to another currency is exactly what provides the ability for trading successfully in Forex trading.

Another currency that found a likely jump in its value in Forex trading due to Forex news is the Japanese yen. On Monday, October 16, 2006, Russia announced that it will add the yen to its Forex reserves. This Forex news fueled a 0.3% rise against the dollar and a 0.2% increase against the euro. This Forex news was significant, not only because Russia’s Forex reserves are the third largest in the world, but because it would likely spur similar actions by other countries. Understanding such actions helps investors to profit while trading Forex.

In Forex news that downwardly affected the Canadian dollar, the Bank of Canada revised forecast for economic growth and decided against raising interest rates. The Canadian dollar could further deteriorate as Canada’s trade position weakens and merger & acquisition inflows slow. The mergers and acquisitions inflows have been attributed with supporting the strength of the Canadian dollar. As the investor in Forex trading performs technical analysis, such statements are an alert to look for potential profits. Canadian dollars purchased prior to the announcement of economic forecasts could already be sold for profits, and positions held until year-end economic reports are available could be even more profitable. While the Forex news reports are a setback for Canada, they can be quite valuable in Forex trading while an investor tries to learn Forex trading.

Forex trading, like other markets, is based on opportunities; opportunities seized and opportunities missed. While the media earns a living reporting and analyzing Forex news, the investor needs to take advantage of this outlet while currency trading. If there is a little help on the six o’clock news for an investor, it might be the best news of the day!

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