Dow Jones down over 500 Points for 3rd time this week.

U.S. Dollar Trading (USD)

U.S. Dollar Trading (USD) gained against most of the majors after stocks slumped again and reversed some early USD weakness. Problems with GM credit lines sent market sentiment tumbling. Gold Jumped but oil slipped on the weakening economic outlook. One slight positive was the drop in Weekly Jobless Claims to 478K from 497K last week. In the U.S. share markets, the NASDAQ was down 95 points (-5.47%) and the Dow Jones was down 678 points (-7.33%). Crude Oil closed down -$2.36 ending the New York session at $86.59 per barrel. Looking Ahead, September Fed Budget expected at $70B vs. $112.9B previously. August International Trade Balance is expected at -58.8B vs. -62.2B.

European Euro

The Euro (EUR) continued to recover as sentiment and stocks gained in Europe but fell off again as US stocks crashed. Weak Oil and heavy EUR/JPY selling weighed. German Trade Balance gained to 13.1 Billion Surplus. Overall the EUR/USD traded with a low of 1.3580 and a high of 1.3743 before closing the day at 1.3610 in the New York session.

Japanese Yen (JPY)

The Japanese Yen (JPY) was sold during the Asian and European Session as the sentiment improved somewhat but things turned around in the US session as stocks slumped again and investors surged back into the safe haven. Weighing on the Market was that Japans UFJ bank may not invest in Morgan Stanley. Overall the USDJPY traded with a low of 98.99 and a high of 101.49 before closing the day around 99.75 in the New York session.

Pound Sterling (GBP)

The Sterling (GBP) came under pressure in the US session as waves of GBP/JPY selling led the pound towards the key 1.70 level. UK Nationwide House Prices fell -1.3% in September. Overall the GDP/USD traded with a low of 1.7152 and a high of 1.7395 before closing the day at 1.7198 in the New York session.

Australian Dollar (AUD)

The Australian Dollar (AUD) staged the biggest recovery during the beginning of the day jumping over 400 points before running into a wall of offers above .7100 and then started to fall as US stocks plummeted. Australian Employment change was at expectations with a gain of 2.2K jobs and an increase in the unemployment rate to 4.3% from 4.1% in September. Opened the Asian session on a very weak footing. Overall the AUD/USD traded with a low of 0.6650 and a high of 0.7135 before closing the US session at 0.6900.

Gold

Gold (XAU) eased off the 900 level when risk sentiment moderated before surging back the key that level during the US session. Overall trading with a low of USD$882.20 and high of USD$882 before ending the New York session at USD$886 an ounce.

Technical Analysis: Dow Jones Down

Euro (EUR)

Euro – 1.3565 : Initial support at 1.3545 (Oct 8 low) followed by 1.3344 (Oct 6 low). Initial resistance is now located at 1.3786 (Oct 9 high) at followed by 1.3907 (Oct 3 high).

Yen (JPY)

Yen – 98.60 : Initial support is located at 97.68 (Mar 19 low) followed by 96.85 (Mar 18 low). Initial resistance is now at 101.69 (Oct 8 low) followed by 103.29 (Oct 7 high).

Pound Sterling (GBP)

Pound – 1.7020 : Initial support at 1.7000 (Psychological number) followed by 1.6904 (June 2003 low). Initial resistance is now at 1.7067 (Oct 9 low) followed by 1.7658 (Oct 7 high).

Australian Dollar (AUD)

Australian Dollar – 0.6695 : Initial support at 0.6631 (Oct 9 low) followed by the 0.6437 (Oct 8 low). Initial resistance is now at 0.7148 (Oct 8 high) followed by 0.7355 (Oct 7 high).

Gold (XAU)

Gold – 923 : Initial support at 856.7 (Oct 8 low) followed by 820 (Oct 3 low). Initial resistance is now at 925 (Oct 9 high) followed by 935 (July 25 high).

As the name depicts, Euro is the official currency of the European Union. 15 member states of the organization are currently using Euro for trade. These states include France, Germany, Italy, Greece, Austria, Finland, Cyprus, Belgium, Ireland, Portugal, the Netherlands, Spain and Slovenia. Euro is also used in five other countries with formal agreements which are Monaco, San Marino, Vatican City, Mayotte and Saint Pierre and Miquelon. Without any type of agreements, Euro is also under circulation in six other countries including Andorra, Kosovo, Montenegro, Akrotiri and Dhekelia.

European Union introduced Euro in 2002. At present, Euro is one of the strongest contenders against the US Dollar. The European Standard Bank is the principal bank that makes a decision on the monetary policies like rise in interest rates, keeping inflation checked, etc. Keeping in view its past record (when despite the slow economic growth it kept the interest rates steady) we can say that Euro is less likely to face adjustments in exchange rate.

The influences of Euro are many. It has made many lives simpler by eliminating the currency exchange phenomenon from their daily lives, thus enabling easy payments and allowing to compare prices in a convenient way. At the same time, the negative aspects of the single currency include higher prices and more importantly, the lack of an autonomous economic policy.

Euro is mostly traded in pair with US Dollar. It means that when the US Dollar rises against the Euro, the Euro will fall. For example, if inflation is high and the Federal Reserve lifts the interest rates, this will result in upward trend of the US Dollar and thus Euro will slightly fall. Similarly, as the majority of world oil trade is done in US Dollars, so when the oil prices move higher, the Dollar also strengthens, thus affecting the Euro to decline. Euro is largely dependent on the manufacturing industry of the countries included in Euro Zone. Better production in these countries would increase the strength of Euro.

The British Pound Sterling, commonly known as the POUND is the official currency of the United Kingdom and the Crown Dependencies. When the Euro Zone countries introduced Euro as a single currency, the Pound Sterling became the oldest currency of the world being used. At the moment, it holds the world’s third largest share of global currency reserves after US Dollar and Euro.

On the list of world's most-traded currencies, British Pound Sterling holds the fourth place. The Pound is openly traded in the foreign exchange markets all over the world. Its value fluctuates in relation to the other currencies. It can be said that the value of Pound rises when the traders buy pounds and it falls when the traders sell pounds.

Despite of the fact that Pound Sterling is not fixed to Euro for trading, mostly they move in sync with each other. When the inflation increases and the government decide to increase the interest rate, the value of Pound also boosts against Euro and other currencies. Following the repeated increase in the interest rates in 2006 and 2007, the Pound hit a high against US Dollar for a long time in April 2007.

The pound is largely influenced by the oil production. The oil production by the Britain in North Sea greatly affects the British economy which in turn affects the pound. This clearly indicates that Britain has energy reserves and whenever the oil prices hike, the British pound also amplifies. The Bank of England may need to keep a check on inflation, if the oil prices rise. This will also affect the consumer spending badly.

The British Pound is also largely influenced by the European currency, Euro. If Euro strengthens, the Pound is likely to become weak. Thus, trading Euro with Pound can turn out to be quite a liquid trading relationship.

The Canadian Dollar is the currency of Canada. In foreign exchange trade, it is also termed as "The Loonie". It is issued by the Bank of Canada which is also responsible for making economic and financial policies for the nation. Many central banks around the world keep Canadian Dollars as the reserve currency.

A major decline was observed in Canadian Dollar against US Dollar during the technological boom of the 1990s that was focused on United States. From that time on, it has made a strong place for itself in the international foreign exchange trading markets.

It has risen against all the major currencies, primarily because of the high prices of commodities, which are exported by Canada. Canada also holds one of the major crude oil reserves on the globe. The main costumer of Canada is United States of America. Thus if the oil prices increase, the Canadian Dollar is also strengthened.

In 2007, the Canadian Dollar rose sharply against the US Dollar because of the constant muscle of the Canadian economy and the weakness of the US currency on the world foreign exchange markets. Since most of the export and import businesses of Canada are linked with United States, so the main interest of the Canadians in the value of its currency against US Dollars is understandable.

Although the Canadian Dollar tends to move along US Dollar in the international markets, yet Canadian Dollar is considered to be more stable than its US counterpart. The swift growth in the value of the Canadian Dollar lifts the price of Canadian exports to the United States, which make up a large part of the economy. With the increase in the Canadian Dollar, it becomes easier for the Canadian industries to buy foreign material and businesses.

As clearly indicated by the name - the Swiss Frank is the currency of Switzerland. It is also used in Liechtenstein. It is commonly known as "the Swissy". CHF is the official ISO code of the Swiss Frank to be used by the banks and other financial institutions, however many users of the currency, including stores and advertisers, abbreviate it as Swf or SFr for their own convenience. Mainly Swiss Franc is traded with US Dollar in pair.

It is collectively agreed that Swiss Frank is the only currency in the countries of the Euro zone which has the potential to do better than the Euro, in the case of any dissension between the member countries. It is very strongly backed by the gold and is commonly known as the safest currency to trade in.

There are some factors which influence the Swiss Frank. The top of the list is inflation of the economy. Other major factors include economic contraction, excessive economic growth and political instability. It is carefully termed as a “safe haven currency”. Virtually it has no or zero inflation at all. Another reason for the muscle of the Swiss Frank is a legal necessity that at least 40% is supported by the gold reserves.

Higher the prices of gold in the international market, the stronger the Swiss Frank will be. We know that when a country increases its interest rates, the value of its currency also strengthens. It is because of the fact that the foreign investors are magnetised by the higher interest rates. For example, if the banks raise the interest rates in Switzerland, the shareholder may choose to get rid of other currencies and buy more Swiss Francs. In this case, the Swiss Franc will rise as compared to the other currencies. It is considered as a very stable currency in foreign exchange markets of the world.

Australian Dollar is the official currency of the Commonwealth of Australia including several islands under its influence. Its ISO official code is AUD but it is also commonly written as the dollar sign with the letters AU. At present, it is estimated to hold the sixth place on the list of world’s most traded currencies. It shares about 5% of the world wide foreign exchange business.

The foreign currency traders all over the world like to trade in Australian Dollars because of the high interest rates in Australia. It is also greatly exposed to Asian economic markets and the commodities cycle. The general stability of the economic and the political system of the country also attracts the investors to invest in Australian Dollar.

Australia has a gigantic metal mining industry. Thus when the metal prices tend to go up, Australian Dollar also sees an upward trend. The Australian economy is highly facilitated by strong domestic economic activity. The economy of Australia is mainly dependent on the policies of the West. It’s a capitalist economy and has the GDP per capita income at par with the four leading economies of Western Europe.

Australia has reinforced its relations with China over the recent years. This association has helped a great deal in strengthening the economy of the country, thus escalating the value of Australian Dollar.

One thing which has affected the Australian Dollar in a negative way is the country’s trade deficit which went bad due to famine in some areas of the country and strong requirement to import. Another point of concern is the brisk increase in the domestic housing prices. This has raised the prediction that the Central Bank will have to increase the interest rates to keep the prices and inflation under control. This will stop the crisis from aggravating further and will help the economy to be secure.

The Gold is commonly termed as XAU index in economic markets. It is an index which expresses the volume of shares of companies which are mining gold and silver and are listed on the Philadelphia Stock Exchange. It includes a number of companies which are involved in the gold and silver mining industry. It is an index which means that its mere a figure calculated on the price of a set of individual stocks. In other words, we can say that it is a way by which the over all gold and silver mining industry is tracked.

XAU is the most extensively trailed stock index of gold stocks. XAU can not be directly bought or sold, however its future value can be bought or sold. With the ever-escalating universal interest in the gold trade, it is time to take another look at gold and the Philadelphia Stock Exchange Gold and Silver Index from a short-term perception.

There are some brilliant proprietary gold stock indices created by a variety of analysts, but none have yet triumphed in the battle for widespread admiration and following. Gold XAU acts as a barrier against the inflation.

The price of Gold XAU is also connected with the price of crude oil. Since the spike in the crude oil prices over the last a few months, it has been noticed that the price of Gold XAU has also increased a lot. The conflict between Iran, which is the fourth largest crude oil producer and the Western countries, has created world wide concern, thus increasing the price of oil and gold at the same time.

Gold is considered as an alternative to the world’s reserve currency – the US Dollar. It means that the Gold and US Dollar are inversely proportional. It clearly deduces that when the gold prices rise, the dollar goes down.

The traders buying and selling in the forex market rely largely on the information contained in the economic reports released from time to time. They give different indications to the market about the improvement or decline in the country’s economic health. The forex trader has to follow these reports closely, in order to improve his trade. All of these economic reports serve a specific purpose and can be of use in one situation or the other. However, some of the more important economic reports are:

1. The Gross Domestic Product (GDP): GDP is considered as the most important measure of the country’s economy. The two reports which are issued a couple of months before the final figures of GDP are very important. These include the advance report and the preliminary report. They are given a lot of significance by the forex traders.

2. Retail Sales: This report gauges the sum receipts of all retail stores in the entire country. This calculation is commonly developed from a diverse sample of retail stores throughout the nation.

3. Industrial Production: Industrial report depicts the change in production of mines, factories and utilities within a nation. The traders who closely follow this report are normally concerned with utility production.

4. Consumer Price Index (CPI): The CPI is a measure of the average price level paid by urban consumers for a fixed bunch of goods and services. A range of user fees and taxes directly connected with the costs of specific goods also form part of the CPI.

Most important economic indicator to track is undoubtedly Gross Domestic Product (GDP), as agreed by most of the economists. Other key indicators comprise Industrial Production, Purchasing Managers Index (PMI), Producer Price Index (PPI), Consumer Price Index (CPI), Durable Goods Orders, Employment Cost Index (ECI), Retail Sales and Housing Starts.

These economic indicators are essential for the forex traders as they measure the condition of the economy of any given country and an experienced trader judges the future trends in the economic market by studying these indicators.