American currency (USA dollar, USD) in forex
First of all, you have to understand what Forex stands for, that is, foreign exchange. This is also called FX. When you trade in the Forex market, one currency is bought while another currency is simultaneously sold. Sometimes the foreign exchange market is called an over-the-counter market.
When getting into the nitty gritty of the Forex market, we see that currencies often trade in pairs; for example the Euro and the USDollar or EUR/USD or the US Dollar and the Japanese or USD/JPY. With the Forex market there is no centralized exchanged. All transactions happen by way of electronic network or by telephone.
The US dollar could finally break the ice this week. This currency continues to trade on the near critical levels on the Forex market today. The Forex market is still waiting for a directional break. However, commodity dollars such as the Canadian dollar as well as the New Zealand dollar have begun to tumble below key support.
While important rate decisions are to be announced and consumption and employment indicators are to be released, this week may be the one in which we shall see meaningful breakfast.
Two sources are responsible for the daily turnover in the world: foreign trade and speculation for profit. Most of the traders in the Forex market go for the largest, most liquid currency pairs such as the US dollar, Euro, Swiss Franc, Australian Dollar, Japanese Yen, British Pound and the Canadian Dollar.
Forex - the world's most traded market
The Forex market has a daily turnover of US$3.2 trillion which makes it the most traded all across the globe. Investors are able to respond right away to currency fluctuations even if they occur at night.
As the heart of the Forex market, the US dollar is often known as the base currency for quotes. When you see that the base currency is USD, it usually tells you what the US dollar is worthy in another currency.
There are three exceptions to the rule when majors are not based on the US dollar. These exceptions are the British pound(GPB), the Australian dollar(AUD) as well as the Euro(Eur). When you see that the USD is not one of the base currencies, a rising quote means that the US dollar is showing signs of weakness. A higher currency quote means that the base currency shows signs of strengthening and a lower quote means that the base currency is getting weaker. Sounds pretty simple doesn't it? It would serve you well to paper trade before you actually trade in the Forex market.