JPY vs The major currency

Is the Japanese Yen on a loosing ground again? It’s time to look at EUR/JPY. Price is testing the previous high of Feb 07. The all time high was recorded in 1999 at a price of around 162, it is now in the 159 zone. MACD is suggesting an uptrend. Then if you look at USD/JPY, there seems to room for upside movement but is resisted by a previous support. I don't think the Bank of Japan will sit there and do nothing. Today, the Bank of Japan announced that they are adding two new members to their policy board as the terms of Fukuma and Haru expire. Not much is known about the new members, but traders should become familiar with the names Kamezaki and Nakamura, since their comments could not move markets. I will rely on Technical Analysis to tell me the story.

EUR/USD rally on Home Sales Data

What a rally on Monday night (Singapore time). U.S. home sales data was suprisingly weak. Markets took this data seriously and we can see price rocket on EUR/USD chart. This data will now make Bernanke's testimony on Wed more important as he will definitely be questioned by law makers on recent sub-prime fallout and a further slowdown in the housing market. More data will be release in upcoming days and I will be watching especially on Ben's speech on Wednesday.

EUR/USD current movement

Just wanna share my view on recent movement on EUR/USD. If u look at the hourly chart, market seems to be trading sideways in the beginning of the week ranging from 1.3278 to 1.3323 Then came the announcement of FOMC meeting about interest rate on 21 Mar (midnight)SG time. And the market chiong like crazy, but it retrace back to its previous trading range the next two day.
Lets look at the daily chart and the trend line I've drawn. Although some news said that USD is gaining strength, but I think its a short term movement. I go for a sell, until price reach 1.3200 and see what will happen next. As long as it does not break bellow my trend line, outlook is still uptrend.

How to look at Forex Quotes

It might be confusing to look at foreign exchange quote at first. It is quit easy to understand actually, the first currency on the left is the base currency and it is always value at 1.

The U.S. dollar is the centerpiece of the Forex market and is usually the 'base ' currency for quotes. In the 'Majors' includes USD/JPY, USD/CHF and USD/CAD. For these currencies and many others, quotes are expressed as a unit of $1 USD per the second currency quoted in the in the pair. For example, a quote of USD/JPY 117.01 means that one U.S. dollar is equal to 117.01 Japanese yen.

When the U.S. dollar is the base unit and a currency quote goes up, it means the dollar has appreciated in value and the other currency has weakened. If the USD/JPY quote increase to 118.00, the dollar is stronger because it will now buy more yen then before.

HISTORY OF RETAIL FOREX

Forex has been trading since the beginning of financial markets, whereas retail trading started at about 1996. Before the internet era of 1996, retail investors were limited in their method for trading the Forex market. One option was to create multiple bank accounts with different currency, and transfer funds from one account to another in order to profit from fluctuating exchange rate. This troublesome method incurred high transaction cost due to the small quantity of funds compare to the size of the market.

The development of web-based technology in 1996 created a new group of market makers who took advantage of the internet-based trading and make it more practical. These emerging groups of market makers took the opposite side of retail traders' trades. Online trading platforms were created by these companies by pooling many retail traders together. Individual who did not have access to Forex spot market can buy and sell easily through the internet platform. By increasing the numbers of retail traders, the companies manage to reduce the amount of spread. As the business grew, better spreads were given to the customers.

THE CONCEPT OF LEVERAGE

Leverage is probably one of the most attractive reason why retailers choose Forex (including me). I will briefly explain the calculation of leverage. Suppose a broker offer you 100:1 leverage for your account. You have $2000 and you wish to trade EUR/USD, it is four decimal place base on EUR/USD (0.0000) The maximum amount you can trade is $2000 x 100 x 0.0001 pip = $20 per pip. Lets say another broker offer 50:1 lverage. $2000 x 50 x 0.0001 pip = $10 per pip

The calculation is different for Japanese Yen because it is traded at two decimal place USD/JPY (0.00) High leverage can act as an double edge sword. If you are right on the trade, your account could gain 100% return in just a few days, but if you are wrong... your account could be wipe out. Therefore a strict stop loss rules should be included for all trades.