Housing Starts 

Housing Starts are a measure of the number of residential units on which construction is begun each month and the level of housing starts is widely followed as an indicator of residential construction activity. 

The indicator is followed to assess the commitment of builders to new construction activity. High construction activity is usually associated with increased economic activity and confidence, and is therefore considered a harbinger of higher short-term interest rates that can be supportive of the involved currency at least in the short term.

Retail Sales 

Retail Sales are a measure of the total receipts of retail stores. Monthly percentage changes reflect the rate of change of such sales and are widely followed as an indicator of consumer spending. 

Retails Sales are a major indicator of consumer spending because they account for nearly one-half of total consumer spending and approximately one-third of aggregate economic activity. 

Often, Retail Sales are followed less auto sales because these are generally much more volatile than the rest of the Retail Sales and can therefore obscure the more important underlying trend. 

Retail Sales are measured in nominal terms and therefore include the effects of inflation. Rising Retail Sales are often associated with a strong economy and therefore an expectation of higher short-term interest rates that are often supportive to a currency at least in the short term.

Durable Goods Orders 

Durable Goods Orders are a measure of the new orders placed with domestic manufacturers for immediate and future delivery of factory hard goods. Monthly percent changes reflect the rate of change of such orders. 

Levels of, and changes in, durable goods order are widely followed as an indicator of factory sector momentum. 

Durable Goods Orders are a major indicator of manufacturing sector trends because most industrial production is done to order. Often, the indicator is followed but excludes Defence and Transportation orders because these are generally much more volatile than the rest of the orders and can obscure the more important underlying trend. 

Durable Goods Orders are measured in nominal terms and therefore include the effects of inflation. Therefore the Durable Goods Orders should be compared to the trend growth rate in PPI to arrive at the real, inflation-adjusted Durable Goods Orders. 

Rising Durable Goods Orders are normally associated with stronger economic activity and can therefore lead to higher short-term interest rates that are often supportive to a currency at least in the short term.

Payroll Employment 

Payroll employment is a measure of the number of people being paid as employees by non-farm business establishments and units of government. Monthly changes in payroll employment reflect the net number of new jobs created or lost during the month and changes are widely followed as an important indicator of economic activity. 

Payroll employment is one of the primary monthly indicators of aggregate economic activity because it encompasses every major sector of the economy. It is also useful to examine trends in job creation in several industry categories because the aggregate data can mask significant deviations in underlying industry trends. 

Large increases in payroll employment are seen as signs of strong economic activity that could eventually lead to higher interest rates that are supportive of the currency at least in the short term. If, however, inflationary pressures are seen as building, this may undermine the longer term confidence in the currency.

Producer Price Index 

The Producer Price Index (PPI) is a measure of the average level of prices of a fixed basket of goods received in primary markets by producers. The monthly PPI reports are widely followed as an indication of commodity inflation. 

The PPI is considered important because it accounts for price changes throughout the manufacturing sector. 

The PPI is often followed but excludes the food and energy components as these items are normally much more volatile than the rest of the PPI and can therefore obscure the more important underlying trend. 

Studying the PPI allows consideration of inflationary pressures that may be accumulating or receding, but have not yet filtered through to the finished goods prices. 

A rising PPI is normally expected to lead to higher consumer price inflation and thereby to potentially higher short-term interest rates. Higher rates will often have a short term positive impact on a currency, although significant inflationary pressure will often lead to an undermining of the confidence in the currency involved.

Consumer Price Index 

The Consumer Price Index (CPI) is a measure of the average level of prices of a fixed basket of goods and services purchased by consumers. The monthly reported changes in CPI are widely followed as an inflation indicator. 

The CPI is a primary inflation indicator because consumer spending accounts for nearly two-thirds of economic activity. Often, the CPI is followed but excludes the price of food and energy as these items are generally much more volatile than the rest of the CPI and can obscure the more important underlying trend. 

Rising consumer price inflation is normally associated with the expectation of higher short term interest rates and may therefore be supportive for a currency in the short term. Nevertheless, a longer term inflation problem will eventually undermine confidence in the currency and weakness will follow.

Gross Domestic Product 

The Gross Domestic Product (GDP) is the broadest measure of aggregate economic activity available. Reported quarterly, GDP growth is widely followed as the primary indicator of the strength of economic activity. 

GDP represents the total value of a country's production during the period and consists of the purchases of domestically produced goods and services by individuals, businesses, foreigners and the government. 

As GDP reports are often subject to substantial quarter-to-quarter volatility and revisions, it is preferable to follow the indicator on a year-to-year basis. It can be valuable to follow the trend rate of growth in each of the major categories of GDP to determine the strengths and weaknesses in the economy. 

A high GDP figure is often associated with the expectations of higher interest rates, which is frequently positive, at least in the short term, for the currency involved, unless expectations of increased inflation pressure is concurrently undermining confidence in the currency.

Trade Balance 

The trade balance is a measure of the difference between imports and exports of tangible goods and services. The level of the trade balance and changes in exports and imports are widely followed by foreign exchange markets. 

The trade balance is a major indicator of foreign exchange trends. Seen in isolation, measures of imports and exports are important indicators of overall economic activity in the economy. 

It is often of interest to examine the trend growth rates for exports and imports separately. Trends in export activities reflect the competitive position of the country in question, but also the strength of economic activity abroad. Trends in import activity reflect the strength of domestic economic activity. 

Typically, a nation that runs a substantial trade balance deficit has a weak currency due to the continued commercial selling of the currency. This can, however, be offset by financial investment flows for extended periods of time.

Trade Balance 

The trade balance is a measure of the difference between imports and exports of tangible goods and services. The level of the trade balance and changes in exports and imports are widely followed by foreign exchange markets. 

The trade balance is a major indicator of foreign exchange trends. Seen in isolation, measures of imports and exports are important indicators of overall economic activity in the economy. 

It is often of interest to examine the trend growth rates for exports and imports separately. Trends in export activities reflect the competitive position of the country in question, but also the strength of economic activity abroad. Trends in import activity reflect the strength of domestic economic activity. 

Typically, a nation that runs a substantial trade balance deficit has a weak currency due to the continued commercial selling of the currency. This can, however, be offset by financial investment flows for extended periods of time.

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THEMES TO WATCH – UPCOMING SESSION

US Jun. preliminary University of Michigan Confidence (1400) 
US Treasury Secretary Geithner to Speak at G-8 News Conference (Sat 1330) 
New Zealand Apr. Performance of Services Index (Sun 2230) 
New Zealand Q1 Manufacturing Activity (Sun 2245) 

Market Comment:

More verbal intervention out of Asia overnight as Japan's FinMin Yosano described Japan's confidence in US debt as "unshakable". But confidence in US debt was already evident yesterday with strong results from the latest treasury auction - this time the longest term 30-year US T-bonds. Strangely, the USD didn't react at all to the auction results, instead seeming to follow the ebb and flow in equity prices and then following through stronger in the European session today. There seem to be growing signs of an exhaustion in the weak USD move here, though we have yet to breach significant technical levels. The last four daily bars have seen strong moves in the opposite direction of the previous day's action.

Chinese data overnight seems to confirm the idea that the Chinese consumer is consuming and that industrial production is recovering, though anecdotal evidence suggests troubling trends and questions the strength of the recovery. The NY Times article about Chinese commodity buying yesterday noticed that lower grades of steel were being consumed in very large quantities as these are the types of metal associated with road building, etc., while higher grades associated with consumer products were seeing less demand. 

The G-8 summit this weekend is unlikely to produce much of note for the FX market. There has been a reasonable noise level of late on the idea of reserve diversification into so-called IMF SDR's, but this kind of thing moves slower than molasses and the level of verbal intervention out of Asia would suggest that China and others won't want to be too loud about any diversification plans as this would be tantamount to a shooting themselves in the foot. Rather, the focus of the 
G-8 most relevant for currencies is the discussion of "exit strategies", led, of course, by the German ueber-hawks, who, despite panic, worse-than-the-Great-Depression contractions in their export-related industries are worried about how the worlds' central banks are going to withdraw liquidity and extract itself from the programs that were enacted to prevent a complete meltdown of the financial system and economy.

It appears the USD strengthening today has a bit more conviction, and this is certainly supported in the comeback by US T-bonds yesterday and the correction in commodities - especially oil - today. Gold is also scratching to local new lows today, certainly confounding the old theme that no currencies are to be trusted. With six virtually unchanged days on the US equity indices having completely taken the momentum out of the shorter term bull move there, are we set up for a nasty correction now? The lack of any sizeable correction all the way up in risk appetite actually makes the risk for an ugly correction higher in our view. Look out for a dramatic volatility expansion if risk aversion develops here. ( See the AUDJPY chart below for the classic technical pattern that develops in these kinds of situations.)

Charts: EURUSD and AUDJPY 

EURUSD - developing head and shoulders?
The technicals for the EURUSD chart are more than interesting if this sell-off deepens toward the 1.3800 area, which would complete the neckline for a rather compelling head and shoulders pattern. But already today we also have a key support area in the form of the 21-day moving average close to the day's lows around 1.3955. Further south, the key 1.3720 area support looms. A break there could see follow through all the way to the 200-day moving average down below 1.3400.

MAJOR HEADLINES – PREVIOUS SESSION

New Zealand Apr. Retail Sales rose +0.5% MoM vs. +0.2% expected, but fell -0.1% ex Autos vs. +0.4% expected 
China May Retail Sales grew 15.2% YoY vs. 15.0% expected and 14.8% in Apr. 
China May Industrial Production rose 8.9% YoY in May vs. 7.7% expected 
Japan May Consumer Confidence rose to 36.3 vs. 34.0 expected and 33.2 in Apr. 
EuroZone Apr. Industrial Production fell -21.6% YoY vs. -19.8% expected 
US May Import Price Index rose + 1.3% MoM vs. 1.4% expected and fell - 17.6% YoY vs. -17.5% expected

Stronger verbal intervention on the USD and treasuries by Japan helps boost the greenback. CAD suffering the most at the moment.

Yet another bull/bear tug of war in equities yesterday as risk appetite seems to be at a fulcrum. Will USD benefit on swoon in confidence?

Currencies traded freely on foreign-exchange markets have a spot rate (applying to trades settled “spot”, i.e., two working days hence) and a forward rate. Countries can determine their exchange rates in a variety of ways.
1. A floating exchange rate system where the currency finds its own level in the market.
2. A crawling or flexible peg system which is a combination of an officially fixed rate and frequent small adjustments which in theory work against a build-up of speculation about a revaluation or devaluation.
3. A fixed exchange-rate system where the value of the currency is set by the government and/or the central bank.

 • EURUSD Means that you trade EUR against dollars. If you buy euro you pay in dollars and if you sell euro you receive dollars.

 • FX, Forex, Foreign Exchange All names for the transaction of one currency for another, e.g. you buy GBP 100.00 with USD 150.25 or sell USD 150.25 for GBP 100.00.

 • Interbank Short-term (often overnight) borrowing and lending between banks, as distinct from a banks business with their corporate clients or other financial institutions.

 • Interest rate differential The yield spread between two otherwise comparable debt instruments denominated in different currencies.

 • Leverage (gearing) The investor only funds part of the amount traded.

 • Long To buy.

 • Long position A position that increases its value if market prices increase.

 • Liquid (-ity) The capacity to be converted easily and with minimum loss into cash. A liquid market is one in which there is enough activity to satisfy both buyers and sellers. Ultra-short-dated treasury notes are an example of a liquid investment. 

 • Margin The deposit required when entering into a position as well as to hold an open position. Your margin status can be monitored in the Account Summary.

 • NYSE The New York Stock Exchange.

 • Open position A position in a currency that has not yet been offset. For example, if you have bought 100,000 USDJPY, you have an open position in USDJPY until you offset it by selling 100,000 USDJPY, thus “closing” the position. 

 • Over the counter When trading takes place directly between two parties, rather than on an exchange. Over the counter trades can be customised whereas exchange-traded products are often standardised. 

 • Pips A pip is the smallest unit by which a Forex cross price quote changes. So if EURUSD bid is now quoted at 0.9767 and it moves up 2 pips, it will be quoted at 0.9769.

 • Position Traders talk of “taking a position” which simply means buying or selling currency cross. “Position” can also refer to a trader's cash/securities/currencies balance, whether he or she is short of cash, has money to lend, is overbought or oversold in a currency, etc.

 • Risk Trying to control outcomes to a known or predictable range of gains or losses. Risk management involves several steps which begin with a sound understanding of one's business and the exposures or risks that have to be covered to protect the value of that business. Then an assessment should be made of the types of variables that can affect the business and how best to protect against unwelcome outcomes. Consideration must also be given to the preferred risk profile – whether one is risk – averse or fairly aggressive in approach. This also involves deciding which instruments to use to manage risk and whether a natural hedge exists that can be used. Once undertaken, a risk-management strategy should be continually assessed for effectiveness and cost. 

 • Secondary currency (variable currency or counter currency) The currency that the investor trades the base currency against (i.e. USD in EURUSD).

 • Short position A position that benefits from a decline in market prices.

 • Short To sell.

 • Speculative Buying and selling in the hope of making a profit, rather than doing so for some fundamental business-related need.

 • Spot A Spot rate is the current market price of an asset.

 • Spot market The part of the market calling for spot settlement of transactions. The precise meaning of “spot” will depend on local custom for a commodity, security or currency. In the UK, US and Australian foreign-exchange markets, “spot” means delivery two working days hence. 

 • Spread The difference between the bid and the ask rate.

Glossary
 • Appreciation An increase in the value of a currency.

 • Ask The price requested by the trader. This usually indicates the lowest price a seller will accept.

 • Base currency The currency that the investor buys or sells (i.e. EUR in EURUSD).

 • Bear Someone who believes prices are heading down. A bear market is one in which there has been a sustained fall in prices and which does not look like it will recover quickly.

 • Bid The price offered by the trader. This usually indicates the highest price a purchaser will pay. 

 • Bid/Ask The Bid rate is the rate at which you can sell. The Ask (or offer) rate is the rate at which you can buy.

 • Bull Someone who is optimistic about the market. A bull market is characterised by enthusiastic and sustained buying.

 • cross When trading with currencies, the investor buys one currency with another. These two currencies form the cross: for example, EURUSD.

 • Cross rate An exchange rate that is calculated from two other exchange rates.

 • Depreciation/decline A fall in the value of a currency.

 • Exchange rate What one currency is worth in terms of another, for example the Australian dollar might be worth 58 US cents or 70 yen.

Further Reading
To see how you can trade the Forex market and benefit from our toolbox of information and live quotes, please proceed to the Forex Quick Start found under the Trading menu of SaxoTrader.

Trading Scenario – Trading Falling Prices 
If, on the other hand, you believe that the euro will weaken against the dollar, you'll want to sell EURUSD.

 • You sell euro We quote EURUSD at a Bid price of 0.9875 and Ask price of 0.9880 and you decide to sell euro 100,000 at a Bid price of 0.9875.

 • The market moves in your favour The euro weakens against the dollar and the EURUSD is now quoted at bid 0.9744 and ask 0.9749.

 • Now you buy back your euro You buy EUR at an ask price of 0.9749. 

 • Your profit/loss is then Sell price-buy price x size of trade 
(0.9875 minus 0.9749) multiplied by 100.000 = USD 1260 Profit 

 Remember that trading EUR 100,000 as we have done in our examples, does not mean that you have to put up euro 100,000 yourself. On a 2% margin means that you have to deposit 2.0% of euro 100,000, which is euro 2,000 on margin as a guarantee for the future performance of your position.

Trading Scenario – Trading Rising Prices
If you believe that the euro will strengthen against the dollar you'll want to buy euro now and sell it back later at a higher price.

 • You buy euro We quote EURUSD at Bid 0.9875 and Ask 0.9878, which means that you can sell 1 euro for 0.9875 USD or buy 1 euro for 0.9878 USD.

In this example you buy euro 100,000, at the quote price of 0.9878 (ask price) per euro. 

 • The market moves in your favor Later the market turns in favour of the euro and the EURUSD is now quoted at Bid 0.9894 and Ask 0.9896.

 • Now you sell your euro and get the profit You sell euro at a Bid price of 0.9894.

 • The profit is calculated as follows Sell price-buy price x size of trade 
(0.9894 minus 0.9878) multiplied by 100.000 = USD 140 Profit 
(Note that the profit or loss is always expressed in the secondary currency)

Important Forex Trading Terms Spread
The spread is the difference between the price that you can sell currency at (Bid) and the price you can buy currency at (Ask). The spread on majors is usually 3 pips under normal market conditions. For more information on the trading conditions at Saxo Bank, go to the Account Summary on your Client Station and open the section entitled “Trading Conditions” found in the top right-hand corner of the Account Summary. 
Pips 
A pip is the smallest unit by which a cross price quote changes. When trading Forex you will often hear that there is a 3-pip spread when you trade the majors. This spread is revealed when you compare the bid and the ask price, for example EURUSD is quoted at a bid price of 0.9875 and an ask price of 0.9878. The difference is USD 0.0003, which is equal to 3 “pips”.

On a contract or position, the value of a pip can easily be calculated. You know that the EURUSD is quoted with four decimals, so all you have to do is cancel out the four zeros on the amount you trade and you will have the value of one pip. Thus, on a EURUSD 100,000 contract, one pip is USD 10. On a USDJPY 100,000 contract, one pip is equal to 1000 yen, because USDJPY is quoted with only two decimals.

Why Trade Forex?
24 hour trading
One of the major advantages of trading Forex is the opportunity to trade 24 hours a day from Sunday evening (20:00 GMT) to Friday evening (22:00 GMT). This gives you a unique opportunity to react instantly to breaking news that is affecting the markets. 
Superior liquidity
The Forex market is so liquid that there are always buyers and sellers to trade with. The liquidity of this market, especially that of the major currencies, helps ensure price stability and narrow spreads. The liquidity comes mainly from banks that provide liquidity to investors, companies, institutions and other currency market players. 
No commissions
The fact that Forex is often traded without commissions makes it very attractive as an investment opportunity for investors who want to deal on a frequent basis. 
Trading the “majors” is also cheaper than trading other cross because of the high level of liquidity. For more information on the trading conditions of Saxo Bank, go to the Account Summary on your SaxoTrader and open the section entitled “Trading Conditions” found in the top right-hand corner of the Account Summary. 
100:1 Leverage
Leverage (gearing) enables you to hold a position worth up to 100 times more than your margin deposit. For example, a USD 10,000 deposit can command positions of up to USD 1,000,000 through leverage. You can leverage the first USD 25,000 of your investment up to 100 times and additional collateral up to 50 times. 
Profit potential in falling markets
Since the market is constantly moving, there are always trading opportunities, whether a currency is strengthening or weakening in relation to another currency. When you trade currencies, they literally work against each other. If the EURUSD declines, for example, it is because the US dollar gets stronger against the euro and vice versa. So, if you think the EURUSD will decline (that is, that the euro will weaken versus the dollar), you would sell EUR now and then later you buy euro back at a lower price. In case that the EURUSD indeed declines, then you can take your profit. The opposite trading scenario would occur if the EURUSD appreciates.

Trading on Margin
Trading on margin means that you can buy and sell assets that represent more value than the capital in your account. Forex trading is usually conducted with relatively small margin deposits. This is useful since it permits investors to exploit currency exchange rate fluctuations which tend to be very small. A margin of 1.0% means you can trade up to USD 1,000,000 even though you only have USD 10,000 in your account. A margin of 1% corresponds to a 100:1 leverage (or “gearing”). (Because USD 10,000 is 1% of USD 1,000,000.) Using this much leverage enables you to make profits very quickly, but there is also a greater risk of incurring large losses and even being completely wiped out. Therefore, it is inadvisable to maximise your leveraging as the risks can be very high. For more information on the trading conditions of Saxo Bank, go to the Account Summary on your SaxoTrader and open the section entitled “Trading Conditions” found in the top right-hand corner of the Account Summary.

Forward Outrights
For forward outrights, settlement on the value date selected in the trade means that even though the trade itself is carried out immediately, there is a small interest rate calculation left. The interest rate differential doesn't usually affect trade considerations unless you plan on holding a position with a large differential for a long period of time. The interest rate differential varies according to the cross you are trading. On the USDCHF, for example, the interest rate differential is quite small, whereas the differential on NOKJPY is large. This is because if you trade e.g. NOKJPY, you get almost 7% (annual) interest in Norway and close to 0% in Japan. So, if you borrow money in Japan, to finance the trade and buying NOK, you have a positive interest rate differential. This differential has to be calculated and added to your account. You can have both a positive and a negative interest rate differential, so it may work for or against you when you make a trade.

Trading Forex

A currency trade is the simultaneous buying of one currency and selling of another one. The currency combination used in the trade is called a cross (for example, the euro/US dollar, or the GB pound/Japanese yen.). The most commonly traded currencies are the so-called “majors” – EURUSD, USDJPY, USDCHF and GBPUSD.

The most important Forex market is the spot market as it has the largest volume. The market is called the spot market because trades are settled immediately, or “on the spot”. In practice this means two banking days.

Overview 
Foreign exchange, Forex or just FX are all terms used to describe the trading of the world's many currencies. The Forex market is the largest market in the world, with trades amounting to more than USD 3 trillion every day. Most Forex trading is speculative, with only a low percentage of market activity representing governments' and companies' fundamental currency conversion needs. 

Unlike trading on the stock market, the Forex market is not conducted by a central exchange, but on the “interbank” market, which is thought of as an OTC (over the counter) market. Trading takes place directly between the two counterparts necessary to make a trade, whether over the telephone or on electronic networks all over the world. The main centres for trading are Sydney, Tokyo, London, Frankfurt and New York. This worldwide distribution of trading centres means that the Forex market is a 24-hour market.

Foreign Exchange 

This short introduction explains the basics of trading Forex online, a brief explanation of the markets and the major benefits of trading Forex online. There are also two scenarios describing the implications of trading in a bear as well as a bull market to better acquaint you with some of the risks and opportunities of the largest and most liquid market in the world.

FOREX RATES
  Pakistan Open Market Forex Rates 
 Updated at : 13/6/2009 4:13 PM (PST)
  Currency Buying Selling 
   Australian Dollar              65.30 66.30 
 Canadian Dollar                  72.40 73.40 
 China Yuan                         11.25 12.00 
 Euro                                     112.80 114.50 
 Japanese Yen                     0.8180 0.8280 
 Saudi Riyal                            21.40 21.60 
 U.A.E Dirham                       21.95 22.15 
 UK Pound Sterling                133.00 135.00 
                                                                   US Dollar                           80.95 81.25