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Special report on forex market 23 dec
 

Special report on forex market 23 dec

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    Special report on forex market 23 dec Special report on forex market 23 dec Document Transcript

    • www.TheEquicom.com +919200009266 1
    • INTRODUCTION HISTORY OF FOREX MARKET MARKET SIZE AND LIQUIDITY MARKET PARTICIPANTS DETERMINANTS OF EXCHANGE RATES FINANCIAL INSTRUMENTS TECHNICAL VIEW CONCLUSION www.TheEquicom.com +919200009266 2
    • The foreign exchange market (Forex, FX, or currency market) is a global decentralized market for the trading of currencies. The main participants in this market are the larger international banks. The foreign exchange market works through financial institutions, and it operates on several levels. Behind the scenes banks turn to a smaller number of financial firms known as “dealers,” who are actively involved in large quantities of foreign exchange trading. The foreign exchange market is unique because of the following characteristics: Its huge trading volume representing the largest asset class in the world leading to high liquidity; Its geographical dispersion; Its continuous operation: 24 hours a day except weekends, i.e., trading from 20:15 GMT on Sunday until 22:00 GMT Friday; The variety of factors that affect exchange rates; The low margins of relative profit compared with other markets of fixed income; and The use of leverage to enhance profit and loss margins and with respect to account size. As such, it has been referred to as the market closest to the ideal of perfect competition, notwithstanding currency intervention by central banks. www.TheEquicom.com +919200009266 3
    • Currency trading and exchange first occurred in ancient times. Money-changing people, people helping others to change money and also taking a commission or charging a fee were living in the times of the Talmudic writings (Biblical times). These people (sometimes called "kollybist s") used city-stalls, at feast times the temples Court of the Gentiles instead. Money-changers were also in more recent ancient times silver-smiths and, or, gold-smiths. During the fourth century the Byzantium government kept a monopoly on the exchange of currency. Currency and exchange was also a crucial element of trade in the ancient world so that people could buy and sell items like food, pottery and raw materials. If a Greek coin held more gold than an Egyptian coin due to its size or content, then a merchant could trade fewer Greek gold coins for more Egyptian ones, or for more material goods. This is why the vast majority of world currencies are derivatives of a universally recognized standard like silver and gold. 1880 is considered by one source to be the beginning of modern foreign exchange, significant for the fact of the beginning of the gold standard during the year From 1899 to 1913, holdings of countries' foreign exchange increased at an annual rate of 10.8%, while holdings of gold increased at an annual rate of 6.3% between 1903 and 1913. In fact 1973 marks the point to which nation-state, banking trade and controlled foreign exchange ended and complete floating, relatively free conditions of a market characteristic of the situation in contemporary times began (according to one source), although another states the first time a currency pair were given as an option for U.S.A. traders to purchase was during 1982, with additional currencies available by the next year. www.TheEquicom.com +919200009266 4
    • The foreign exchange market is the most liquid financial market in the world. Traders include large banks, central banks, institutional investors, currency speculators, corporations, governments, other financial institutions, and retail investors. In April 2010, trading in the United Kingdom accounted for 36.7% of the total, making it by far the most important centre for foreign exchange trading. Trading in the United States accounted for 17.9% and Japan accounted for 6.2%. In April 2013, for the first time, Singapore surpassed Japan in average daily foreign-exchange trading volume with $383 billion per day. So the rank became: the United Kingdom (41%), the United States (19%), Singapore (5.7%), Japan (5.6%) and Hong Kong (4.1%). Foreign exchange trading increased by 20% between April 2007 and April 2010 and has more than doubled since 2004. www.TheEquicom.com +919200009266 5
    • Commercial Companies: An important part of this market comes from the financial activities of companies seeking foreign exchange to pay for goods or services. Central Banks: National central banks try to control the money supply, inflation, and/or interest rates and often have official or unofficial target rates for their currencies. Foreign Exchange Fixing; Foreign exchange fixing is the daily monetary exchange rate fixed by the national bank of each country. The idea is that central banks use the fixing time and exchange rate to evaluate behavior of their currency. Hedge Funds as Speculators: About 70% to 90% of the foreign exchange transactions are speculative. They were solely speculating on the movement of that particular currency. Hedge funds have gained a reputation for aggressive currency speculation since 1996. Investment Management Firms: Investment management firms (who typically manage large accounts on behalf of customers such as pension funds and endowments) use the foreign exchange market to facilitate transactions in foreign securities. Retail Foreign Exchange Traders: Individual Retail speculative traders constitute a growing segment of this market with the advent of retail foreign exchange platforms, both in size and importance. Currently, they participate indirectly through brokers or banks. Non-Bank Foreign Exchange Companies: Non-bank foreign exchange companies offer currency exchange and international payments to private individuals and companies. Money Transfer/Remittance Companies and Bureaux De change: Money transfer companies/remittance companies perform high-volume low-value transfers generally by economic migrants back to their home country. www.TheEquicom.com +919200009266 6
    • Economic Factors: These include: Economic policy, disseminated by government agencies and central banks Government budget deficits or surpluses Balance of trade levels and trends Inflation levels and trends Economic growth and health Productivity of an economy Political Conditions: Internal, regional, and international political conditions and events can have a profound effect on currency markets. Market Psychology: Market psychology and trader perceptions influence the foreign exchange market in a variety of ways: Flights to quality, Long-term trends, "Buy the rumor, sell the fact", Economic numbers, Technical trading considerations www.TheEquicom.com +919200009266 7
    • Spot: A spot transaction is a two-day delivery transaction (except in the case of trades between the US Dollar, Canadian Dollar, Turkish Lira, Euro and Russian Ruble, which settle the next business day), as opposed to the futures contracts, which are usually three months. This trade represents a “direct exchange” between two currencies, has the shortest time frame, involves cash rather than a contract; and interest is not included in the agreed-upon transaction. Forward: One way to deal with the foreign exchange risk is to engage in a forward transaction. In this transaction, money does not actually change hands until some agreed upon future date. A buyer and seller agree on an exchange rate for any date in the future, and the transaction occurs on that date, regardless of what the market rates are then. The duration of the trade can be one day, a few days, months or years. Usually the date is decided by both parties. Then the forward contract is negotiated and agreed upon by both parties. www.TheEquicom.com +919200009266 8
    • Swap: The most common type of forward transaction is the foreign exchange swap. In a swap, two parties exchange currencies for a certain length of time and agree to reverse the transaction at a later date. Future: Futures are standardized forward contracts and are usually traded on an exchange created for this purpose. The average contract length is roughly 3 months. Futures contracts are usually inclusive of any interest amounts. Currency futures contracts are contracts specifying a standard volume of a particular currency to be exchanged on a specific settlement date Option: A foreign exchange option (commonly shortened to just FX option) is a derivative where the owner has the right but not the obligation to exchange money denominated in one currency into another currency at a pre-agreed exchange rate on a specified date. The options market is the deepest, largest and most liquid market for options of any kind in the world. www.TheEquicom.com +919200009266 9
    • GBP/USD OUTLOOK: TREND : -CONSOLIDATE RESISTANCE : - 1.6400, 1.6490 SUPPORT : - 1.6270, 1.6200 STRATEGY : - BUY ON DIPS RECOMMENDATION: GBP/USD trading around 1.6330-1.6360 levels, it may show some upward movement towards 1.6500-1.6600 levels, so traders may take long position for the targets of 1.6480/1.6600. www.TheEquicom.com +919200009266 10
    • EUR/USD OUTLOOK: TREND : -CONSOLIDATE RESISTANCE : - 1.3700, 1.3810 SUPPORT : - 1.3540, 1.3390 STRATEGY : - BUY ON DIPS RECOMMENDATION: EUR/USD has shown some downward movement this week, although 5 week positive trend. Now it may follow trend and May shows some upward movement due to positive global cues, so trader may take long position around 1.3650 for the target of 1.3750/1.3950. www.TheEquicom.com +919200009266 11
    • USD/JPY OUTLOOK: TREND : -BULLISH RESISTANCE : - 108.00, 110.50 SUPPORT : - 104.00, 102.00 STRATEGY : - BUY ON DIPS RECOMMENDATION: 50 weeks rally in USD/JPY. It may shows more upward movement towards the level of 108, so trader can take long position in it around 105 for the target of 106.50/110.50. www.TheEquicom.com +919200009266 12
    • USD/INR OUTLOOK: TREND : -CONSOLIDATE RESISTANCE : - 64.05, 65.50 SUPPORT : - 60.50, 58.60 STRATEGY : - SELL ON HIGH RECOMMENDATION: USD/INR trading sideways around the level of 61.00-64.00. Trader can take short position around 62.00 for the target of 60.00/57.00. www.TheEquicom.com +919200009266 13
    • This report is based on our prime research. We use different informative websites for necessary information. The foreign exchange market (Forex, FX, or currency market) is a global decentralized market for the trading of currencies. The main participants in this market are the larger international banks. The foreign exchange market works through financial institutions, and it operates on several levels. Most foreign exchange dealers are banks, so this behind-the-scenes market is sometimes called the “interbank market”, although a few insurance companies and other kinds of financial firms are involved. EUR/USD has shown some downward movement this week but now rally support euro to gain against us dollar. Upward movement towards 1.6500-1.6600 levels in GBP/USD. USD/INR trading sideways to bearish. 50 weeks rally in USD/JPY. www.TheEquicom.com +919200009266 14
    • About TheEquicom The Equicom Financial Research Pvt. Ltd. is India's largest independent, integrated research house. We leverage our unique, integrated research platform and capabilities spanning the entire economy-industry-company spectrum to deliver superior perspectives and insights to over 350 domestic clients, through a range of subscription products and customized solutions. The Equicom Financial Research Pvt Ltd has taken due care and caution in preparing this Report. Information has been obtained by The Equicom Financial Research Pvt. Ltd. From sources which it considers reliable. However the Equicom Financial Research Pvt. Ltd. does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. The Equicom Financial Research Pvt. Ltd. is not liable for investment decisions which may be based on the views expressed in this Report. The Equicom especially states that it has no financial liability whatsoever to the subscribers/ users/ transmitters/ distributors of this Report. The Equicom Financial Research Pvt. Ltd. Operates independently of, and does not have access to information obtained by The Equicom Financial Research Pvt. Ltd Division, which may, in its regular operations, obtain information of a confidential nature which is not available to The Equicom Financial Research Pvt. Ltd. No part of this Report may be published/reproduced in any form without The Equicom prior written approval. www.TheEquicom.com +919200009266 15