Inside Rhythms Of Forex.
When traders come to the Forex market, they always say that it is the only financial market in the world that is working day and night, six days a week. While in principle this statement is right, in practice Forex trading consists of three different daily sessions. Understanding of the nature and features of each session is essential for every trader who is trying to earn money on the opposite movements of the currency market. Briefly: if you wish to trade on intraday basis, then you should to know about the secret rhythms of Forex.
Trades abide the sun around the world. Although Japan is a country of rising sun, it is the unofficial center of the first of three important sessions; trade in the Pacific region begins in Wellington, New Zealand and Sydney, Australia, prior to the opening of trading in Tokyo. Whereas traders in New York think of Sunday dinner, in Asia it has already started the Monday auction. Currencies are available for dealing from 17:00 EST Sunday.
Nevertheless, since the morning is traditionally a time of enervation and relaxation for most persons who just rub their eyes after sleeping, the Asian session is typically the calmest and least volatile in the market. The smallest trading volume of three largest centers of currency trading is in Tokyo. Only 15% of three trillion circulation of Forex fall on Tokyo session. Very often during Asian session the range of motion of the main pair EUR / USD is only 20-30 pips, in this case because of low liquidity the spread between the bid and ask enhances. So, for the pair GBP / USD very often spread grows to 6 pips instead of usually 3 pips in the course of European and U.S. sessions.
In most cases, the most notable price movements during the Asian session occur on the charts of “commodity” currencies of Australia and New Zealand. Very often in the interval between 17 and 19:30 EST it is published economic news about these countries. News about Japan usually are released in the interval between 19:00 and 21:00 EST, but the impact of economic news in Japan for the Japanese yen is typically significantly less than that of similar news for Australia and New Zealand for their domestic currencies. Why does this happen? The answer lies in interest rates and the carry trade.
In the late 80-ies in Japan the bubbles of the stock and real estate market burst, as a result the country was in a long-term deflationary cycle, from which it will have to get out. As a result, the Bank of Japan solved to cut interest rates to 0% in order to induce demand against the background of wastages in the banking system. This policy is known as “zero-rate policy» – ZIRP. Gradually, the economy has revived thanks to export growth, but the discount rate was increased only to 0.5% or 50 basis points, after the Bank of Japan abandoned the “policy of zero-rate” 18 months ago. Taking into consideration the unsteady consumer demand in Japan, most market participants suggest that rising of rates in Japan will be very slow, because the Japanese regulator fears to undermine the weak economic recovery. Thus, the yen is the most low-income primary currency in the world.
Currently people are looking for additional or even primary sources of income as never. World economy is still in tough condition, and to get a well-paid job is quite hard. And forex is one of the ways to make some money. To trade successfully one has to be aware of events on the market, so live forex news is of great help here. Those who don’t know where to receive fx news can take advantage of the online network. Just type “forex news trading“, for example, in Google or other search engine and you will get many news sources to choose from.