Euro Drops ahead of German Key Figures. Latest Currency Market Update

Yesterday the EUR closed trades at 1.4769 versus the USD, the weakest level for the last two weeks. On Tuesday the European currency was at 1.4802, a little bit lower from Monday 14-month high of 1.5064 per Dollar on Monday morning. The EUR/JPY was 135.88, lower from 137.08 on the currency market.

The European currency drop is described by concern on negative German unemployment data due to be released tomorrow. The reading is expected to be 8.3 percent in the month of October, a 0.1 percent drop from September figures. Also the separate researches show that commodity and stock market is likely to peak as recovery in the USA seems to be fragile.

Among today`s important events in economic calendar the major one is the German CPI figures likely to deliver worsening of consumer prices. The Euro will probably lower a little bit moving away from 1.500 level versus the USD.

JPY Is the Week`s Loser

The last week`s major loser is considered to be the Yen, which suffered a lot after the release of America's Non-Farm Payroll data. The Japanese currency reached its year lows versus the EUR and GBP correspondently 138.69 and 163.08. The fall was also considerable against the Dollar as the pair hit the June`s low of 97.76.

As a result of the US NFP report, risk appetite of Forex traders rose sharply. With a surprisingly heavy news week for the Japanese currency ahead of traders, the bearishness is likely to continue this week, since many are expecting positive results which may likely boost the appetite for risk in the market and thus put additional selling pressure on the Dollar and Yen.

New US−Specific Forex Regulations

The approval of Compliance Rule 2-43(b) became effective in November, 2008, but parts of the ruling are still being implemented over time to allow for changes to Forex trading software. This new regulation is made to protect the US retail Forex trader from practices that the NFA (National Futures Association) has determined have no economic benefit to the trader. According to the NFA, this type of hedging increases the customer's financial costs by doubling the expense of entering and exiting positions. In addition, if the trader holds positions overnight, the differences in the interest rate rollover evaluation will cost customers additional money over time if they are short high yield currencies.

The National Futures Association has a website that every customer should visit for more information about their broker. Any Forex broker that is an NFA member has to meet high standards including a large minimum capital requirement to carry out business. Customers should check to see if their US Forex broker is an NFA member, and if they have any past customer complaints by doing a Background Affiliation Status Information Center (BASIC) search.

Latest Forex Market Update

Late Thursday the euro continued its sharp decline against other major currencies after the release June U.S. Payrolls report, which sent forex traders out risky assets.

The euro was at Y134.55 from Y136.76. In New York, the euro traded at $1.4017 from $1.4147 late Wednesday. The dollar was at Y96.01 from Y96.67. The U.K. Pound traded at $1.6352 from $1.6252, and the U.S. Dollar was at CHF1.0851 from CHF1.0748. Later the day, the bad U.S. Non-Farm Payroll report influenced negatively stock markets, bringing the dollar to new daily top against the other major forex currencies. In the U.S.A. stocks and futures for crude oil declined, moving euro below $1.40 level. It also reached its two-session low of Y134.47. The EUR/USD pair continues to be contained in a range although a sharp decline below 1.4000 would give scope to an test and break of 1.3750.

The GBP/USD pair remains 1.6230 and the USD/JPY pivot 93.50. Sideway forex market strategy is seen again for forex currencies bringing another period of economic uncertainty.

View the complete latest development of forex major pairs on the website.

Iran Crisis Influence on Currencies

The new foreign exchange trading week started with the strengthening of the Dollar and Yen. The Asian tarders began buying of these currencies as the way of responding to political events in Iran. As some officials assume, political crisis causes demand for safe assets, such as the Japanese Yen and U.S. Dollar in this case. Both currencies succeeded in trading against Euro, it was reasoned by lowering number of speculating on interest rate difference.

However, the Japanese Yen shows 0.5 percent growth in the pair JPY/USD, meanwhile USD/EUR result does not seem so firm, about ¼ percent. At the open session EUR/USD is at 1.39, as Friday session closed at the point of 1.3940. The attempts to remain under the rate under 39 level failed. USD/JPY fell up to 96 level, while support for Yen came from cross-rates. Talk of bids by Japanese traders at 96.45/50, then 96.15/20 suggests buying the Dollar is favored in Asian market, however, as Nikkei has erased its initial gain(now up 29 points).

At the same time, despite the crisis in Iran the oil prices remain at the same level with no attempt to break the downside trend.

View the complete technical analysis for major world currencies on the website.

Porsche in Search of New Investors

Now Porsche is trying to improve its balance sheet by getting an outside investor. This investor appears to Qatar. At this point, the Porsche and Piech owner family controls 100% of the company's voting shares. This transaction is expected to encourage Europe`s currency market investors.

Additionally, Porsche has asked for a €1.75 billion loan from KfW which is a state-controlled bank for the remainder of a €12.5 billion credit facility, which Porsche anticipated to secure as credit markets turned downside due to financial market woes.

The outcome of the talks with Qatar and KfW are agreed to have a significant impact on Porsche's position in negotiations with Volkswagen over fusion into an integrated company. Both Porsche and Volkswagen keep silence about the current status and prospects of the merger talks since news broke that Porsche might clinch a deal with Qatar.

U.S. Consumer Costs Decline

The living cost in the U.S.A. fell over the last 12 months by the most in sixty years, easing concern that government efforts to revive the economy will lead to a certain outbreak of inflation. The analysts expect it will encourage trade.

The consumer price index slid by 1.3 percent in the year finished in May, the most since 1950. Price index increased only 0.1 percent last month, less than it was expected, with the same position in April 2009.

No rise in sale gains is one reason companies are finding with problem how to pass increases in costs of fuel on to consumers. Higher gasoline price will probably restrain Americans who spend a lot at a time on the background of economy showing positive signs.

Michel Moran, chief economist at Daiwa Securities America Inc. in New York says that inflation is not an serious issue. She says:“There are huge amounts of slack in the economy and demand is quite soft, so it’s difficult to see how inflation can pick up for the balance of the year.”
Energy costs rised by 0.2 percent in May, as a 3.1 percent rise in the price of gasoline was resulted by declines in oil and natural gas.

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No Clear Direction for Market

The euro rose on Wednesday as investors bought it back after steep falls against the dollar and yen this week, but the market struggled for clear direction as it tried to decide if a dollar recovery had run its course.

But with a question over its reserve currency status resurfacing on Tuesday, analysts said the market was not sure which direction to head.

The dollar has fallen against major currencies such as the euro and Australian dollar on the currency market this year, with investors unwinding safe-haven dollar positions as the worst of the economic crisis faded and as questions arose over its suitability as the world's main reserve currency.
Both it and the yen have clawed back some lost ground this month as investors have paused to assess whether rallies in riskier assets including shares have got ahead of themselves.

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