Foreign trade university

[30]

Foreign Trade UniversityBanking and Finance ____***____

Internship ReportTopic: Exchange rate movement analysis for efficient investment in FOREX and commodity market

Name: Dinh Tien ManhID: 1117340098A20 High quality Finance and BankingCourse: K50Supervisor: Msc. Pham Thanh Hung

Hanoi, 8/5/2013

Exchange rate movement analysis for efficient investment in FOREX and commodity market

ACKNOWLEDGEMENT424 Tay Son StreetDong Da district, Hanoi31th July, 2014To my lecturers in Foreign Trade University of Hanoi!To Board of Directors and all of the employees in Hanoi Golden Financial Investment Joint Stock Company!First of all, I would like to express my deepest gratitude to my teachers, friends and familys care in the recent time. I am grateful to you for your help and giving me precious experiences which strongly motivate me in finishing this report with all of my best and having a good preparation for my future work. Especially, I would like to show my gratitude to Mr. Thanh Hung Pham who monitor, help and encourage me a lot during this internship.I also want to take this opportunity to say thank to Mr. Do Dinh Hieu my supervisor, the Head of Sale Department 10 with other member in general for your kind, enthusiastic guidance and cooperation during my internship.Thank you so much for all of your support!Sincerely,Author/Student

ContentsACKNOWLEDGEMENT2PREFACE4Chapter 1: Brief overview of HGI81.1 About HGI81.2 Structure, organization of HGI81.3 Vision and mission101.4 Development101.5 Culture121.6 Operation and businesses14Chapter 2: The FOREX market and commodity market.182.1 The FOREX market182.1.1 What is FOREX182.1.2 What is traded in the FOREX market?192.2 Commodity market212.2.1 What is commodity market212.2.2 Components of Commodity Market222.3 Superior features of FOREX market and Commodity market23Chapter 3: Exchange rate movement prediction analysis263.1 Factors that affects the exchange rate movement293.1.1 Supply and demand293.1.2 Other factors293.2 Forecasting foreign exchange rate movements293.2.1 Fundamental analysis303.1.2 Technical analysis323.1.3 Technical vs. Fundamental323.1.4 Trends343.1.5 Support and resistance353.1.6 Market patterns383.1.7 Tools and indicators46 CASE STUDY50CONCLUSION55

PREFACEIn the age of global integration nowadays when Vietnam become a member of WTO, enterprises and economic organizations are trying to keep up with the development of the world wide economy. And one of the essential aspects that cannot be ignored in this fierce race is finance. Finance and banking is the backbone of any economy. With the indispensable position, Vietnams financial enterprises and economic organizations have gained large amount of money for State Budget contributing to the remarkable rise of annual GDP and keeping the Balance of Payments stable.With such a great need of an intelligible, highly liquid and flexible in a dreary age of other investing channels such as stock market, immovable asset market Our internal banks, financial organizations and companies have learned and brought a more superior channel of investment into domestic market to satisfy the urgent needs of investors. And the currency and commodity market has become the most suitable option for this.One of the most pioneer enterprises in this aspect is Hanoi Golden Investment joint stock company. So lucky that I had a chance to be a trainee student in this company and collect a lot of knowledge and experience about international finance services, products as well as FOREX market during my internship.Through this valuable internship, I have found a great interest in how the exchange rate of currencies and commodities fluctuate. Thus, I decide to carry out a research and report in this subject. Because of many shortcomings in my knowledge and methodology, this report may contain a large amount of weaknesses and superficialities. I hopefully expect your comments, improvement and addition as well to improve my report quality.

APPENDIXFOREX dictionary:Before taking a deep interest in how the exchange rate move, lets take look at these following concepts and terminology Pips: Initials for Price Interest Point are called Pips which is the smallest unit of the price for any foreign currency and commodities. Usually four (some brokers platforms five) decimal points are placed in the currency price. E.g., if the buy price of EUR/USD changes from 1.3426 to 1.3440 it means that there were 14 pips increase in the currency price. Lot: A unit used to measure dealing of transaction in FOREX market. One standard lot size refers to 1000 dollar and the smaller size is called Mini Lot which equals to 0.1 or 100 dollar. (Standard Lot and Mini Lot are the types of accounts allowed by brokers). Leverage: A facility that broker gives to its traders in order to enable them to hold a larger position in their transactions than actual capital hold by them for trading activities. The leverage size can differ from 1 to 500 times of their initial capital depending upon brokers regulations. E.g., if a trader holds $1000 in his account by a leverage of 100 to 1, it means that he can benefit $100,000 in his trading ($1000*100=100,000) account. Higher leverage means higher risk for that the broker takes extra precautionary actions in facilitating the traders. Traders usually earn more profits while maintaining margin account with the broker but at the same time when market moves against the traders position it bring higher losses as well. Bid Price: The bid is the price at which the market dealers are ready to buy a particular currency in FOREX market. E.g. in the quote GBP/USD the bid price is 1.5940/1.5943 meaning that trader can sell one US dollar for 1.5940 Great Britain Pound. Ask Price: The price at which the market dealers are willing to sell a particular currency. More precisely, it can be narrated as the price at which traders buy a 11 particular currency. In the quote GBP/USD, the ask price is 1.5940/1.5943 meaning that trader can buy one US dollar for 1.5943 Great Britain Pound. Spread: the difference between the bid prices and ask prices. Balance: The total amount of investment held by traders in brokers transactional platform when there is no open position in the market is called balance. Margin: Denotes the part of investors deposit (equity portion) that is placed in the brokers account when traders have open sell or buy positions. Margin Account differs from broker to broker. It should be added that with the increase in leverage the investors margin will decrease accordingly. Margin Call: When trader incurs losses and its initial margin (equity portion) becomes inadequate to cover its leverage position with brokerage firm then he or she is sure to receive a margin call from its broker. Whenever, trader receives a margin call from its broker, it means that the trader is required to fulfill its maintenance margin requirement for further trading activities. Hedging: A strategy adopted by traders that protects them against reverse Exchange rate movement while enjoying open position in the market. Take Profit: It is an order made by traders on the platform for a sell or buy position to close the account automatically when the market price reaches to a certain amount. Stop Loss: It is an order executed by traders in the platform for a sell or buy position to avoid more losses when the market moves in the opposite direction of existing position.

Chapter 1: Brief overview of HGI1.1 About HGI

Full name: Hanoi Golden Financial Investment Joint Stock CompanyAbbreviation: Hanoi Golden Investment, JSC (HGI)Website: http://www.hgi.com.vnEmail: cskh@hgi.com.vn

Headquarters: 3rd - 4th floor, Artex building, 172 Ngoc Khanh street, Giang Vo precinct, Ba Dinh district, Hanoi.Phone no.: 84-4-6261 5588 / Fax: 084-4-6273 6787

Ho Chi Minh city branch: 11th floor, ACB building, 444A-446, Cach Mang Thang 8 street, precinct no.11, district no.3, Ho Chi Minh city.Phone no.: 08 3993 1783 - 08 3993 1785

Da Nang branch: 6th floor, PVcombank building, Group A2.1, 30/4 Street, Hai Chau district, Da Nang streetPhone no.: 0511 362 5119 / Fax: 0511 362 1175117

Laos branch: 19 Dongplane, Phonesinuan, Sisatanat, Vientiane

1.2 Structure, organization of HGI

Caption:1: Board of Directors and Director-General

3.1: Deputy Director-General3.2: Chief Financial Officer3.3: Deputy Manager of Profession

5.1: Manager of Financial Investment5.2 5.3 5.4 5.5: Vice Managers

7.1: Strategy Department7.2: Fund for Projects7.3: Legal Department7.4: Derivatives Department7.5: Risk Management for International Commerce Department7.6: Sale Department7.7: Back-office Department

9.1 9.9: Customers system and Customer-care group

1.3 Vision and missionHas its beginning right in the moment of world economic recession, HGI has suffer many difficulties until now. Against challenges and the narrowing trend of almost enterprise in Vietnam, HGI has found its own ways to overcome and become successful with the fastidious market. In time with growth, HGI set up a vision to become one of the most professional financial investment consultancy companies of Vietnam. Become HGIs customer, you will have not only a large and accurate source of latest information but also many trading strategies from HGI expert in FOREX and Commodities trading supplied 24/7. In the near future, with the current speedy expansion HGI will become a large financial center and issue stock in the Stock exchange of Vietnam.To achieve such a result nowadays HGI has its success comes along with a good and clear mission. HGI focus on the quality of services and products rather than operation in a wide range of aspects. Thus efficiency of work is always on the top of requirements. And the missions in operation of HGI are as following: Provide investors and traders with a fair, transparent and profitable investing channel. Continuously update knowledge, information, experience, methods in investing and trading for customers. Always available with methods of investing, risk managing, profit maximizing.And strict rules in work always play an extremely important part to HGI mission: Pioneering Trustworthy; Creative Professional; Dynamic Risk well-managed.1.4 DevelopmentEstablished in May 2009, HGI had started operations in providing financial investment services with 3 following packages: consultative service for investors, fund management, exporting risk management. In November 2009 HGI changed its name into Hanoi Golden Financial Investment Joint Stock Company. In this year also, Board of Directors decided to expand HGI business, which lead to the formation of HGLand - one of the most charismatic real estate exchange in Vietnam.Moreover, with the rise of equity in 2010 to 10 billion VND, showing the efficiency in making profit of HGIs businesses. One more time making an expansion to a brand new market, Hanoi Golden Construction and Investment (HGCI) was established in April 2010 and became main contractors of many large building in Hanoi and other provinces as well. HGCI properly provide customers with services such as work designing consultancy, project management, construction management, project marketing & market development. Particularly, HGCI is still one of the leading units of HGI in a large range of activities with its achievements: 3rd prize in Designing Square of Lord Giong area contest, highest award of Green Architecture contest, 2nd prize in Old Streets area Planning and Designing contest, especially one of the 5 best assignments of Thong Nhat Park Planning contest, the most beautiful park in Hanoi.All of the leaders of HGI are extremely knowledgeable, having large and far vision and of course they know how to fully develop this enterprise in many fields. I really admire those work and vision in this aspect. Building organizational culture plays an important part in developing HGI. Becoming a customer or a member of HGI will show you that. In May 2011, Hong Hac media joint stock company was set up with purposes to build a sustainable culture for enterprise, focus on internal media and actually, they are extremely successful and became a pride of HGI. Beside, Hong Hac media is assigned to promote many publicity campaigns, advertisements and art designing project for HGI. In the early of 2012, Hong Hac media was one of the organizers of Ethnic minority festival in Hoa Binh and take part in arrangement of the event Book festival and Reading culture organized in Temple of literature (the first university of Vietnam) in April 2012 by Ministry of Culture, Sports & Tourism.In this time also, the Laos Branch of HGI came into operation in June 2011. This establishment had internationalized HGI and showed a nonstop development of a company in financial investment aspect. In the next year, the two branches in Vietnam were simultaneously opened in Danang and Ho Chi Minh city, which strengthen the company market all over the country. At this moment, HGI was operating with an equity of 3000 billion VND, a so far larger equity in comparison with it 2 years ago.In the growing trend of the worldwide economy, all of the leaders and members of HGI are trying their best to excellently finish their own mission to develop their company, their country as well as their virtue and personality.1.5 CultureFirst of all, HGIs culture always makes a great deep impress on partners, customers as well as members and staffs of company. That is a unique culture.In general, HGI is a village in the old feudal society of Vietnam. Founding members of HGI has created a country culture with banyan trees, street vendors and communal temples. HGI village was named after a funny famous boy in traditional tale in northern midland of Vietnam, It is Bom. But why is Bom? Because he is honest, straightforward and does not have any sense of greedy or deceitful. HGI founders want customers as well as employees to understand that if we work honestly by our best and keep our calm to stop at the right time, profit will come to us. In trading and investing, ration and emotion management is one of the key skills to be successful. Moreover, Vietnamese always help and support each other from the traditional time, it is a precious property of our country. In HGI you will be help in many different fields by other employees, experts and Board of Directors even. We help each other like people living in a same village in a rural area, as a family. Gradually, all of the HGIers employee are replaced by BomEspecially, Bom village has many activities organized all year round. Annually, HGI have 2 tours, one to the mountainous area visiting Lac Long Quan the Great Father and the other to the sea area visiting Au Co the Great Mother. These trips bring a great significance, they show that we always remember our origin and ancestors. Quarterly, a volunteering tour to remote area will give us a chance to help our poor ethnic fellow-citizens. That is how HGI leaders remind their employees of the insufficient and difficult life of many people who are living in the same nation with us. Thus, this activity encourages HGIers to overcome challenges and hardness they face in daily life and work, be brave to take the responsibility of having a good manner and therefore, motivate HGIers to try their best to self-develop and treasure achievements in their own career. Monthly, HGI publics a monthly news called Boms family magazine each 2 months. This is an internal magazine issue for HGIers. The magazine is a place where HGIs members can tell the whole enterprise what they think, what they want, what they got, which promote HGI culture growth and relationship between employees. What is needed to be improved, maintained or changed also mentioned so that everybody can grow up together and understand each other.Another thing that make Bom village a family is the birthday party celebrated monthly. Boms who have their birthday in that month receive gifts, wish card and a large cake. Actually, it hardly believes that HGI employees rarely face stress or depression. Weekly, there is a thing at HGI that have never been out of date and always been expected. It is a TV show at 16.30pm each Friday with an episode of Bom TV released. It is undeniable that Bom TV has a great role in forming a unique culture at HGI. Hong Hac media has never failed to satisfy their colleagues need of funny and highly educational movies such as Xoi nong, Trao gui yeu thuong, Van hoa Bom gia, Theo dau chan Bom.You can enjoy the Bom TV series at the following link: http://www.youtube.com/LANGBOM Daily, in the morning before working time, all of HGI employees gather in conference room where experts, veteran members or talent sale staffs give presentation to share their experience, analysis and prediction with or teach other members to improve their skills. These activities make HGI a true school where everyone can simultaneously be a teacher and learner. In the opinion of a trainee student like me, this is a precious chance to gain much more practical knowledge than the study at college.Sale room and other departments all have an internal meeting and presentation to discuss methods and efficiency of work or comment on new members presentation at the end of working shift at 11.30 am and 16.30 pm.One of the most interesting things that make HGI culture unique is Tai Quan Chu. It is a street vendor where everyone can have a short break after long, full of stress hours of work. But the special part is that this is a self-service, self-payment, self-cleaning food stall. It means that the revenue and tidiness of this street vendor is dependent on customers. On the other hands, all HGI members are owner of Tai Quan Chu. This policy has raised everyones self-consciousness, which maintains everyones manner to the norm self-work for self-enjoy.Through all of these patterns above, we can partly understand the culture and main principle of HGI. Obviously, organizational culture always has great effects on the success of an enterprise. It motivates employees spirit, prevent job satiation, makes sustainable relationship between enterprise and labors and between labors and labors At HGI you will find that there are 3 slogans visible everywhere: Work for fun Perfect yourself Self-work for self-enjoy.1.6 Operation and businessesIn general, HGI is a multidisciplinary enterprise. So that company has many sources of income such as tourism, construction, media but mainly from financial investment. In tourism, the main activity is running the Phu Hung Resort in Phu Quoc island. This is a big project that came into operation in 2012 and made a profit of 50 billion VND in 2013. HGI is planning to spread its business in tourism to Laos with a resort being under construction in Luong Prabang.In construction, HGCI is suffering a narrow tendency of market because of immovable assets bubble in Vietnam and the global recession in general. However, many other projects from sooner time are run smoothly and take profit for company annually.In media, Hong Hac media JSC properly focus on building organizational culture for HGI and other activities of parent company. However, it gain many achievement in social campaign and events, especially honorable awards from current partners.About financial investment aspect where HGI is one of the largest service suppliers for traders and investors in Vietnam. With a strong financial source and a system of experienced employees, HGI is still successful in maintain its No.1 position in this market, which leads to the establishment of 3 branch in Vietnam and Laos. HGI has competitive advantages in facilities and a professional consultant team. HGI has 2 main product packages: direct investment service and indirect investment service. With the direct investment service, HGI provides customers with 2 packages of product. Those are Traditional service package and Online service package. These 2 service packages allow investors to directly trade in the FOREX market with a large range of products which are pairs of currency and commodities like gold, crude oil, silver Using the Traditional service package, investors will have an account opened by HGI in capacity of a broker. Investors will use this account to make profit as a trader. The following table will make clear about the differences between these 2 packages.

Comparison between HGIs packages of service

HGI TraditionHGI Online

MiniStandardPro

Trading platformTT/ Meta Trader4TT/ Meta Trader4TT/ Meta Trader4TT/ Meta Trader4

Minimum volume of order0.1 Lot0.01 Lot0.1 Lot0.1 Lot

Goldxxxx

Silverxxx

Crude oilx

Currencyxxxx

Maximum volume of orderGold/currency: 8 lot/orderSilver/Oil: 2 lot/orderGold/currency: 8 lot/orderGold/currency: 8 lot/orderSilver: 2 lot/orderGold/currency: 8 lot/orderSilver: 2 lot/order

Maximum number of Pending order (include opposite orders)30 ordersNo limitNo limitNo limit

Commission40 USD/lot at leastnonenonenone

Swapnone3+ USD/lot/day at least2+ USD/lot/day at least1+ USD/lot/day at least

Initial investment1,000 USD250 USD at least1,500 USD at least15,000 USD at least

Minimum top-up250 USD50 USD500 USD1000 USD

Leverage1:1001:2001:1001:100

Spread (Bid/Ask)Gold: 5.0 Pips fixedGold:Market elastic 6.0 pips at leastGold:Market elastic 5.0 pips at leastGold:Market elastic.0 pips at least 4

Silver:0.6 pips fixedSilver:Market elastic0.8 pips at leastSilver:Market elastic 0.6 pips at least

Oil:0.8 pips fixed

Currency:From 2.5 to 4.9 pipsCurrency: Market elastic 4.0 pips at leastCurrency: Market elastic 2.5 pips at leastCurrency: Market elastic 1.5 pips at least

Cut-offMon-Fri: 50%Sat: 100%Mon-Fri: 100%Sat: 200%Mon-Fri: 50%Sat: 100%Mon-Fri: 50%Sat: 100%

Entry of order typeInstant OrderMarket OrderMarket OrderMarket Order

Exit of order typeFirst in - first outFrom the largest lossFrom the largest lossFrom the largest loss

Minimum time between Entry and Exit120s (not for T/P or S/L)No limitNo limitNo limit

Currency used for exchangeUSD, VNDUSDUSDUSD

SupportSummary news, trading strategiesSummary news, trading strategiesSummary news, trading strategiesSummary news, trading strategies

With the indirect investment service package, HGI aims to customers with no intention of directly trading activities. It means that customers will invest in a fund managed by HGI. Along with fund raising, HGI use money from this fund to invest in many other fields as well as trading in the FOREX market. Profit from this type of investment is really high so the investment of customers is very profitable also. HGI pay for customer with a system of interest rate when they entrust their money into HGIs fund. With 3-6 month deposit, the interest rate is 1.5%/month. With 6-12 month deposit, the interest rate is1.8%/month. With 12+ month deposit, the interest rate is 2%/month.General conclusion, HGI take profit from Commissions, Swap and Spread in the Direct investment packages. With the indirect investment package, the profit comes from the disparity in the interest for payment and the real interest from businesses.

Chapter 2: The FOREX market and commodity market.2.1 The FOREX market2.1.1 What is FOREXFOREX or FX and spot FX is abbreviation of FOREX Exchange. This is the largest financial market in the world with the trading volume come up to 1.95 Trillion USD in 2006. Even the Euro currency volume alone is more than 5 times the entire NYSE with 25 Billion USD in volume per day.FOREX is the interbank currency market established in 1971 when the floated price rate was concretized. FOREX market is a place where the currency of each nation is exchanged for commercial trading.FOREX includes a group of 4500 currencies trading organizations, international banks, central bank of governments and many commercial enterprises. The payments for exportation and importation or properties trading are all performed in FOREX market. There are, however, some places for speculators.

So what is the commodity traded in the FOREX market? The answer is Currencies. FOREX trading is to buy an amount of money and sell another amount at the same time. Currencies are traded through brokers or directly in the spot market in pairs such as EUR/JPY or GBP/USD.Trading in the FOREX market can be quite complicated for some people when nothing is bought or sold by hand. Think about buying a currency as a way to buy the share of a company. If you get an amount of JPY, you are directly raising its price, which affect the Japan economy because the price of a nations currency reflects the evaluation of the crowd about that economy now and in the future. In general, the comparison between 2 currencies is also between 2 economies.And unlike other markets, there is no financial or trading center for FOREX. FOREX market is the interbank market and performed in an electronic system connected between many banks in the world, and it works all day and all night. In the past decades, this giant market is only for giant in finance and economy and not until the internet was born and changed everything in economy did tiny investors like us have the right to join such a large market.To join FOREX market, all you need is a computer with internet connected.2.1.2 What is traded in the FOREX market?Currencies, of course, but not all of them. Only the strong and popular currencies are sold and bought between the traders. Here are the main currencies:

The symbol of each currency always has 3 letters with the first 2 letter for countrys name and the last one for currencys name. For example, USD is the United State Dollar or CAD is Canada Dollar.Currency pairs with USD are considered to be major pairs. They have high liquidity and popularly traded all around the world. And the rest without USD is crosses or minor currency pairs. Almost all of them formed from EUR, JPY and GBP. There are some pairs with less popular currencies such as HKD, SGD, ZARAt the moment, USD is the king of all currencies because pairs with USD take a half of regularly traded pairs in FOREX. Even these USDs pairs account for 75% of the total volume traded in FOREX. Moreover USD takes 62% in reserves of all the nations worldwide. So lets keep an eye on USD!

On the other hands, US economy is the largest one in the world, they own the biggest and strongest in liquidity financial market in the world. Behind such a strong base in economy, the US has a stable politics and they are the king of war.It hardly to believe but 90% of total currencies volume traded in the market is from speculators. They take profit and losses also from the fluctuations occurring anytime. Because the liquidity of FOREX market is really high, so rarely is there such a large volume of currencies can affect the price. Its one of the most important and attractive of FOREX market.2.2 Commodity market2.2.1 What is commodity marketFirstly, not all kinds of good are commodity. Commodities are the physical goods used in the initial phase of the manufacturing process, and refer to real assets such as energy, industrial and precious metals, agriculture and livestock.Unlike FOREX market, commodity market has its beginning about several centuries ago. The origin of the commodity market, however, is certified at about more than 100 thousand years ago in the ancient society when people trade preservable goods with unpreservable things from time to time. Its a simple form of derivatives in the commodity market. At about 1100 to 150 years B.C, merchants in Greece start to use the transporting contracts for trading. These contracts are quite similar to future contracts used in the modern commodity market nowadays. Market and international trading is highly developed, which makes these transporting contract quite complicated and strict with the appearance of court, business observers, and clear articles such as price, volume of goods, delivering and loading places, port all mentioned in. From the next 2000 years and later, businessmen in Europe start a kind of confirming paper like Letter of Credit regularly used today, it is called fair letter. After a time of war, almost all of the businessmen gather at a city as a commercial centre and exchange their contracts. Obviously, future contracts and many complicated derivatives tools are fully formed and defined at this time. And in 1700s, a modern type of derivatives market appear in Dojima, Japan when the government start their taxes collection in rice and used auction to liquidated those properties. There are 2 trading floors this time named Shomai and Choaimai for traders and investors. Shomai is a spot market while futures contracts traded and exchanged in Choaimai where market managers have to established a credit system with many financial center for convenient payments. Nowadays economists admit that Dojima is the first derivatives market in history.Although having a great development in Japan, the derivatives only reach its highest level in America when the Chicago Board of Trading established in 1848. And when the general rules and principles of CBOT are approved, which marked the official birth of the modern derivatives trading market.In the first time, there are only cereals and freeze products traded on CBOT. Not until 20th century is gold and foreign currencies brought in. In the time of 1870s and 1880s, some other large trading boards are set up like NYCE, NYMEX, COMEX and FINEX. In 1919, Chicago CME trading floor appear leading to the merge of all other large floors and become the current board of trading nowadays.Besides, Tokyo Commodity Exchange (TOCOM), Sydney Futures Exchange (SFE), the London Metal Exchange (LME), International Petroleum Exchange (IPE) are also greatest trading floor in the world.2.2.2 Components of Commodity MarketA standard is set up for the operation of a Commodity board of trading. It has to include 8 following components:

Figure 1: Standard model of operation of a Commodity Board of Trading Product: there are many types of good traded Agricultural product: rice, coffee, rubber, cotton Energy: crude oil, gas, electricity Metal: gold, silver, copper Food: beef, chicken, butter, milkThese products are supplied by farmers, manufacturers. To ensure the quantity and quality of the goods, quality controllers are needed. Warehouse: enormous amount of commodities traded makes it indispensable for these Board of Trading to set up a high standard warehouse system. They can be placed in many other countries for convenient transportation and business. Transporters: almost are aviation companies, shipping companies who supply the service of transporting commodities from suppliers to warehouse and from warehouse to customers in the range of all over the world. Clearers: they are financial organizations, bank who carry out the payments arise from trades performed in the global commodity market. Hedgers: they are financial institutions, banks, insurance companies who provide guarantee service for trades and goods during the time of transporting Customers: they are companies, organizations who have demand in physical goods and commodities. They participate in this global market seeking for good price and high quality goods. Traders/Speculators: they are individuals, organizations who do not have needs in real commodities. Their participation in the global commodity market is to get profit by trading with considerable fluctuation in price of commodities. These components use a kind of online software to join the competition with many other traders/speculators from all over the world2.3 Superior features of FOREX market and Commodity market2.3.1 A global 24-hour marketThe FOREX market is unique in that traders can access a 24-hour market very conveniently, without having to wait for the markets to open. At any time, there is always a major financial center open where banks, hedge funds, corporations, and individual speculators are trading currencies. Traders can trade during anytime of the day or night, and do not have to wait for any markets to be opened before placing their trades. This is particularly beneficial to people who hold nine-to-five jobs since they can trade it without any problems in the evening or night. The market runs 24 hours for 5.5 days a week because markets around the world open and close at different times. In stock or futures markets, you can only actively trade for less than 7 hours a day.With the stock and futures markets, one would need to have access to electronic communication networks (ECN) for pre-market trading, or would have to wait till the markets open. The chance of the prices gapping up or down against traders is obvious, especially if there have been news while the markets are closed.2.3.2 Extremely high liquidityAccording to the Central Bank Survey of the FOREX market conducted by the Bank for International Settlements, as at 2006, daily trading volume reached an all-time record high of $1.95 trillion, up 58% from 2001. Its undeniable that this humongous daily trading volume is about 20 times that of the New York Stock Exchange and the NASDAQ combined?With about 75 percent of foreign exchange transactions having a dollar leg, you dont have to worry about liquidity issues when trading any of these big-economy currencies, which are namely, USD, GBP, EUR, CHF, JPY, CAD, AUD and NZD. However with stocks, futures, options or commodities, you tend to be restricted by their illiquidity especially during after-hours.2.3.3 Risk managementMost brokers guarantee fills on stop-loss and limit orders on up to a certain number of standard lots, and provide instantaneous trade executions from real-time quotes which are displayed on the screen. There is usually no discrepancy between the displayed price and the execution price during normal market conditions. However, you may be subjected to slippage when you trade during news or during periods of high volatility. In the futures and stock markets, execution price can be vague because all orders must be done through the exchange, and slippage and partial fills are common especially in the futures market due to the chaotic open-outcry system.2.3.4 Equal and clear informationFOREX is not only enormous but also very fair in news publicity and the number of traders is huge so that no one (even central bank of big economy) can control the price of any currency pair. Thus, traders can invest their money without worrying about individuals or organizations who can manage the price of a currency in a long time.In fact, there some reputed people like George Soros outlying the trends and principles. But there are not many, even rarely individuals like him.2.3.5 Buy or Short-Sell anytimeWhen trading stocks, short-selling is only allowed with an uptick, so it can be very frustrating for traders to wait and see their stocks trend downward, while waiting for an uptick. In the futures market, there is a limit down/limit up rule which kicks in when the contract value declines or increases by more than a certain percentage from the previous days close. However, in the FOREX market, you can short a currency pair anytime without having to wait for any upticks, and this translates to a more efficient and instant order execution.2.3.6 Flexible LeverageThe FOREX market offers the highest leverage available for any market. Leveraged trading allows FOREX traders to execute trades up to $500,000 with an initial margin of only $5000. That means you get as high as 100-to-1 leverage or more, offered by most online FOREX firms on standard-sized accounts. However, it is important to note that while this type of leverage allows investors to maximize their profit potential, the potential for loss is equally large. The good thing is, it is up to you to select the amount of leverage that you are most comfortable with.2.3.7 Profitable In All Market ConditionsWith FOREX, you can have the freedom to long or short currency pairs whenever the opportunity comes, since there are no exchange-enforced restrictions on daily activities, like for stocks or futures.2.3.8 Low Barriers to EntryPeople would think that getting started as a currency trader would cost a ton of money. The fact is, when compared to trading stocks, options or futures, it doesn't. All broker company offers software with trading account with small amount of money.2.3.9 Demo TradingBrokers also offer a demo account to allow you to practice trading and build your skills, daily market analysis and trading platform system. Newbies in FOREX are recommended to start by opening a demo account as it is a very valuable resource for those who are financially hampered and would like to sharpen their trading skills with virtual money before opening a live trading account and risking real money.In conclusion, as can be seen from all of the features above, FOREX and commodity market is long known as an attractive investing channel for all of the traders around the world.Chapter 3: Exchange rate movement prediction analysisFirst of all, I want to show you how they get profit by trading things in the FOREX market. In general, profit from FOREX mostly comes from trading with the fluctuation in the exchange rate. It means that if the price of a currency pair rise, I will buy it right away. The extremely high liquidity of FOREX market allows you to sell it back almost all the time. But what if thing goes reverse? Of course I will short-sell it. However, with the innovation of the technology and the boom internet, it make us possible to trade in FOREX more flexibly with software including many types of order that are suitable for almost anytime you want to get profit. Within the content of this report, I only want to introduce the Meta Trader 4 one of the most popular trading platform used all over the world. There 2 types of trading order in MT4, those are Instant order and Pending order. With Instant one, you just need to wait for a low price for a buy order and continue to wait until price gets high again and sell it to get profit.. Contrary to Instant order, if you want to make a sell order (short-selling) all you need is to wait until the price gets high and click sell. As the price go down again, you close the order and get profit. Quite easy to understand. With Pending one, everything may seem to be a little bit more complicated. Actually, FOREX is a non-sleep market, but no one, even the most hard-working trader can stays all day in front of the computer and screen to make an order. So it really makes sense that how to stay at the right time when the market fluctuates to make profit. The answer is a Pending order, which allows you to trade at a forecasted price. In fact, there are 4 kinds of Pending order: Buy limit is waiting to buy something at a lower price compared to current price.For example: the current price of gold is 1300 per ounce. You may predict that it will go down to somewhere at about 1250 and then go up again to the current price. You should take a Buy limit order at 1250. When you finish, the software will wait the price to be at 1250 and then automatically enter a buy order. So when you come back and find that your prediction is definitely. You already have profit Sell limit is an opposite order of Buy limit when you set up a Sell order at a higher price compared with the current price. If there is nothing wrong happens with your prediction and the price fall down again after it rise to the price that you enter your Pending order. You already have some profit. Buy stop, unlike buy limit, buy stop is the Pending order to buy something at higher price than the current price. For example, you predict that the price of gold will rise from 1300 to 1350. You should enter a Pending order at 1325 so that when it reaches its peak at 1350, you will get a large profit. Sell stop is the reverse version of buy stop when you think that the price is in a downward trend so that you can enter a sell stop order in the middle of the trend. Of course, your profit must exceed all the fees like commission, swap or spead. Stop loss and Take profit:The appearance of these 2 actions is an advanced feature of trading with software. They allow you to set limitations for the profit as well as the loss you may receive when you cannot monitor the price fluctuation all the time. Here is an example:

As you can see in the picture above, I have entered an Instant Sell order at 1288.83 because I predict that the price is being in its downward trend. But if my prediction is wrong when price of gold rises and it turns out to be a loss, the order will be closed automatically at 1293 (the upper line) to prevent me from larger loss. Similar to Stop loss line, Take profit line is set up below the traded price and will close my order automatically when I get enough profit because without monitoring the price, I may lose my profit when the market go reverse.In conclusion, trading in FOREX market is now more convenient, manageable and interesting also. You now have tools to trade when you cannot stay in front of the screen subscribing the market. Moreover, T/P and S/L also provide you with a system of risk and capital management. Now, we will start our research in price and exchange rate movement.

3.1 Factors that affects the exchange rate movement3.1.1 Supply and demandThe FOREX is driven by supply and demand. To determine where a particular countrys economy may be headed next, traders turn to a variety of data, including: Gross domestic product (GDP), imports, exports, employment, unemployment, growth, debt, and many other factors. Collectively, these are often referred to as the fundamentals. Like any other market, the value of currencies responds to changes in supply and demand. When the world needs more Dollars, for example, the Dollar becomes worth more. When too many Dollars are available on the market, or the need for them declines for some reason, then the Dollar drops in value.3.1.2 Other factorsFOREX market goes far beyond basic supply and demand figures. Everything that affects political and economic situation of a country, will affect its currencys value. Other fundamental factors can be categorized in four categories: economic factors, financial factors, political factors and crises. Usually economic data is scheduled for release in advance. This helps traders to plan more carefully their trades based on fundamental factors.3.2 Forecasting foreign exchange rate movementsAnalysis of the market is not merely a part of trading; it is the essence of FOREX trading. Market analysis generally takes one of two approaches, or a merging of the two approaches. The first approach, fundamental analysis, considers factors and events, opinions and policies that might impact the future value of a currency. The second approach, called Technical Analysis, involves the study of historic and current currency values and trading volume. Whatever the approach, the objective of analysis-technical, fundamental, or blended-is to attempt to project currency price direction and identify trading opportunities.3.2.1 Fundamental analysisMaking trading decisions based on fundamental analysis means buying or selling currency as exchange rate is expected to go up or down, because of a news release or other economical incident. The news releases that affect exchange rates are news containing information about economic indicators such as interest rates, gross domestic product (GDP) or employment cost index (ECI). When these economically important numbers are released currencies will react immediately. If the numbers vary a lot from what was expected, huge moves can occur. Economic calendar is an important tool for a fundamental trader. These calendars are created by economists and they try to predict the upcoming economic figures and values based on previous months.Beside news releases on economic calendars, fundamental traders usually follow carefully for example speeches of leaders of the European Central Bank, chairman of the Federal Reserve Bank of USA and Secretary of the Treasury. Also speeches of presidents might have an effect on exchange rates.

Figure 2: An economic calendar for 24th of July 2014 (http://www.FOREXfactory.com/)Economic calendar is an important tool for fundamental traders. The first column of an economic calendar shows the date, second the time, third shows the currency, which will be affected and the fourth one shows how big is the impact expected to be (red being high and yellow low). The fifth column shows the event. The sixth column shows details after clicking the links. Forecast shows how the numbers are expected to be and previous shows what they were last time. The column actual will be updated after the data is out. The fundamental traders, who use economic calendars as a tool for trading, follow the calendar very carefully. The might also watch the events on TV or online if possible. It is important to know which indicators will affect the exchange rates and how. Traders might trade before different news are released but they also watch corrections in the market Exchange rate movements, when differences between forecasts and actual information occur.What are Fundamental factors?News that has an impact on the economy both directly and indirectly is considered a fundamental factor. These fundamentals are separated into three major categories: Economic factors, financial factors, and political factors which include crises.Economic and financial factors have the biggest impact on currencies movements. The reason that economic and financial data releases are watched is the uncertainty concerning the release's outcome or results. The fundamental reports are kept under strict secrecy up to the time of the actual occurrence. Central banks, for example, change the discount rate confidentially and even though the markets closely watch these events, sometimes the outcomes do not coincide with the predictions. The deciding factor in whether a fundamental release will have an effect on the currency market is how closely the actual results come to economists' predictions. If the fundamental release matches predictions then it should have already been "priced in" to the market beforehand. However, if the release strays from the anticipated numbers, then it will have a bigger impact on the market.The dates and times of economic data release are well known and are anticipated by the market. There are many resources available on the Internet concerning financial and economic indicators. CMS provides an Economic Calendar for the dates of critical fundamental announcements and events.Political factors can include elections, high level talks, and crises. Some political factors, such as a presidential election or a G7 meeting are scheduled beforehand and can be anticipated. A political crisis such as a nuclear test by a nation such as North Korea, or a terrorist attack such as 9/11 can have dramatic effects on the currency markets and are almost impossible to predict. However, only big political events that can affect the patterns of trade or working of an economy or group of economies will have an effect on the financial markets.3.1.2 Technical analysisWhat is it and why it works?Technical analysis is the analysis of past price data to determine future Exchange rate movements. It is the study of prices in order to make better trades. The basis of modern-day technical analysis can be traced back to the Dow Theory, developed around 1900 by Charles Dow. It includes principles such as the trending nature of prices, confirmation and divergence, and support and resistance. Technical analysts, or chartists, use a number of tools to help them identify potential trades.Technical analysis uses past and current behavior to predict future behavior. Technical analysis works because humans are predictable. People often behave in predictable ways. They will consistently repeat their behavior under similar circumstances. Technical analysis is the art and science of identifying crowd behavior in order to join the crowd and take advantage of its momentum.3.1.3 Technical vs. FundamentalFundamental analysis studies the cause of market movement where as technical analysis tries to figure out the effect. Most traders are aware of both methods but they will specialize on either of them. Technicians and fundamentalists are often in conflict with each other, because one tries to predict the future with present events and the other uses history to predict the future. Technical analyst looks at the charts, while fundamentalist follows at news releases and financial statements. Technical analysis will not predict the future but it can offer valuable information on which direction the price will most likely go next.One important difference between these two methods of trading is that even if fundamental analysis can be used more in longer timeframe trading it does not necessarily explain the exchange rate movements in shorter timeframes. Here is an example.

Figure 3: An economic calender in 23th and 24th July 2014 (http://www.FOREXfactory.com/)

Figure 4: NZD/USD Exchange rate in July 23th and 24th (HGI trading platform, demo account)As you can see from 2 pictures above, even though there were no economic data incidents during that period of time affecting NZD or US zone, a move from 0.86991 to 0.86174 (more than 80 pips) occurred. Hence this movement cannot be explained by fundamental factors.3.1.4 Trends The price moves in trends. This is the most important fact of technical analysis. Trends are followed because they are most likely going to continue than reverse. Markets are expanding and retracing constantly. The nature of the market is to move into a certain direction and then pause or retrace. Prices will move either upwards or downwards for some time, but at some point they make corrective moves (retracements) and after that oscillate between the top and bottom of the price. As the price moves in trends it always contains retracement moves and ascending/descending tops and bottoms. During and up-trend, the price pattern produces higher highs (tops) and higher lows (bottoms).

Figure 5: AUD/USD exchange rate chart (HGI Trading platform, demo account)From 25th Feb 2009 to 24th August 2009 a clear up-trend is shown.

Figure 6: AUD/USD exchange rate chart (HGI Trading platform, demo account)From 23rd October 2013 until 23rd Jan 2014 an obvious down-trend on EUR/USD exchange-rateUnfortunately, trends are not always as easy to recognize, there might not even be a clear up-trend or down-trend. These horizontal movements are called channel trends (the price is moving sideways). In horizontal channels, supply and demand seems evenly balanced within the patterns. Buyers and sellers are equally matched each time the currency pair reaches the previous high or previous low. These equal highs and equal lows form Support & Resistance lines (will be explained later) that the price will not cross. However, eventually a breakout from these channels will occur. There are three things happen when a breakout upwards from a channel occurs: 1) Buyers overcome sellers, 2) volume increases as more people are buying and 3) as people take some profit, price might come downwards for a bit, but they wont go below the former resistance line, which then becomes support line (as you can see in the Figure 7)3.1.5 Support and resistanceTechnical analysis does not have to be confusing and complex. There are hundreds of mathematical indicators, studies, patterns and rules that a can be very difficult to understand. A trader does not necessarily have to worry about different indicators. He can already trade using technical analysis by knowing the ideas of support and resistance.Support and resistance are the peaks and lows. The lower points are called support (as the price will not go lower) and the highs are resistance (as the price refuses to go any higher). Support and resistance are one of the oldest principals used in technical analysis. When using support and resistance as a tool in trading, profit are usually made during breakouts (when price pushes through support or resistance line) and continues that the longer the price has been trying to push through the line the stronger the breakout will be. Resistance levels are formed as buyers are unwilling to pay higher prices selling pressure exceeds buying pressure. Support levels occur because sellers are unwilling to accept lower prices and buying pressure exceeds selling pressure. Breakouts from support and resistance lines occur when buyers overcome sellers (breakout from resistance), volume is increasing (as many traders noticed the breakout) and the price eases back (when traders take profit). However, even if the price comes downwards again, very often the previous resistance line becomes a support line.

Figure 7: A resistance line on XAU/USD exchange-rate chart (HGI Trading Platform, demo account)Resistance line will not allow the price to go higher but eventually it is broken and after that one of the basic principles of support and resistance occurs; resistance becomes support.

Figure 8: A support line on XAU/USD exchange-rate chart (HGI Trading platform, demo account)3.1.6 Market patternsIn addition to trends and support & resistance also other chart patterns can provide important information for technical analysts. Market patterns are based on support & resistance lines on a price chart. These patterns can create trading signals or give signs of future price movements. Patterns are used to identify whether a trend is going to continue or reverse.It is an important fact about market patterns to understand that they are created by human behavior. Price action on an exchange-rate chart form patterns as traders buy and sell currencies. One of the basic ideas of technical analysis is that history repeats itself. The market patterns have worked in past, and they will be predicable today as well. This is explained with the amounts of technical analysts on the market. When a certain pattern is forming, there are numerous people following the creation of the pattern. When the price for example breaks out from a resistance line there are more people buying, which means that the price will go up.Below some market patterns that technical analysts follow:

Head & Shoulders:Head & Shoulders is one of the most used market pattern in technical analysis. It is a reversal pattern. When it is formed, it signals the previous trend to reverse.

Figure 9: Head & Shoulders (HGI Trading platform)The picture illustrates a clear Head & Shoulders market pattern. There are two shoulders, head and a neckline. After making a high (left shoulder), the price goes down to form a neckline. After that it bounces up to form the head, then again downwards to form the right shoulder. After forming the right shoulder it goes to the neckline and trend reverses.

Double Tops and Double Bottoms:A double top is a reversal pattern that is formed after there is an extended move up. The tops are peaks which are formed when the price hits a certain level that cant be broken. After hitting this level, the price will bounce off it slightly, but then return back to test the level again. If the price bounces off of that level again, then a DOUBLE top!

Figure 10: Double Tops (HGI Trading platform)In the chart above you can see that two peaks or tops were formed after a strong move up. Notice how the second top was not able to break the high of the first top. This is a strong sign that a reversal is going to occur because it is telling that the buying pressure is just about finished.

The double bottom is also a trend reversal formation, but this time we are looking to go long instead of short. These formations occur after extended downtrends when two valleys or bottoms have been formed.

Figure 11: Double bottoms (HGI Trading platform)

Symmetrical triangle is a formation where highs and lows form a triangle. During this formation the market is making lower highs but higher lows. Neither the buyers nor sellers are in control of the market to make a clear trend.

Figure 12: Symmetrical triangle (HGI Trading platform)In a symmetrical triangle the exchange-rate squeezes in triangular form pattern, where prices test the support and resistance lines before breaking out of the formation.

Ascending triangle includes an even resistance level and higher lows. Buyers cannot take control of the price even though the price is pushed upwards. After most ascending triangles the price will eventually breakout upwards.

Figure 13: Ascending triangle (HGI Trading platform)In an ascending triangle exchange-rate produces higher lows but equal highs until the buyers take control and the price will start going upwards.

Descending triangle is the opposite of ascending triangle. Lower highs form the upper line and the lower line is even. During these formations sellers are gaining ground over the buyers.

Figure 14: Descending triangle (HGI Trading platform, demo account)

Flags are formed when there is a sharp price movement followed by sideways movement. They are called flags because of direct movement upwards or downwards followed by a channel. Flags are good patterns as they usually include a profit target. Usually the flagpole is as long as the breakout will be.

Figure 15: Flag (HGI Trading platform)Price went up sharply at first then a downward sloping channel was formed until the price finally broke out from the channel.

3.1.7 Tools and indicatorsInstead of looking at trends, market patterns or support and resistance lines, technical analysts can use technical indicators for analyzing future price movements. There are more than 200 different technical indicators and they are usually based on mathematical calculations of previous price data. These indicators can be used one at a time or a chart may include several indicators simultaneously. A minus side on technical indicators is that they only calculate mathematical formulas and they do not take other market variants such as market patterns and support or resistance lines into account. That is why one should never base trading decisions only on mathematical indicators.Moving averages is one of the easiest technical indicators to understand. There are different sorts of moving averages (simple, exponential, weighted), which are used for example for filtering out the noise in price movements, identifying trends and creating signals. Simple moving average is a sum of prices divided by the number of days.

Figure 16: Moving Average line

Bollinger bands are used to identify, whether the prices are high or low so that a trader can make entry/exit decisions by comparing price actions. Bollinger bands provide information about the price situation relative to past actions on market. If the prices are close to the upper line, it means they are quite high. If the prices are close to lower line, it means they are quite low. This helps a trader to understand, which direction the price is more likely to go next.Stochastic indicator identifies tops, bottoms and swings of a price. It measures the position of the exchange rate compared to its most recent price range and the relationship between the closing price and its highs and lows during a certain number of days. The meaning of this indicator is to get information, when the market is overbought or oversold.MACD is an indicator based on moving averages. It is the difference between 26-and 12-day exponential moving averages added with 9-day exponential moving average to signal buy/sell opportunities. The basic rule is to sell when the MACD (26 and 12 EMA) falls below the signal line (9 EMA line). MACD can be used to show entry signals but also overbought/oversold situations and trend changes.Relative Strength Index (RSI) indicates markets current strength or weakness by comparing the magnitude of recent gains to recent losses. RSI is one line moving on scale from 0 to 100 and it is simple to understand: If it drops below 70, there is a sell signal and if it goes above 30, there is a buy signal.Volume indicator is used to show the strength of upwards/downwards movement. Many traders use it for confirmation of entry and exit signals.

Figure 17: Indicators in action (HGI Trading platform)All the technical indicators shown above are: 1.Bollinger bands, 2.MACD, 3.RSI, 4.Stochastic, 5.Volumes.Even though technical indicators provide important information on entry signals, trends and market volumes, they might be confusing, if one tries to use all of them simultaneously. Also technical indicators might take a lot of room from the price chart itself. The price action is the most important factor of technical analysis and it cannot be fully seen if it is full of technical indicators. Technical indicators should never be used alone as a trading system, as they do not take market variants such as support & resistance into account.a. Which type of analysis is best?In forecasting foreign exchange rate movement, FOREX traders make use of two main kinds of analysis. Those who concentrate on price action, and ignore most other factors choose to direct their efforts at perfecting their skills at technical analysis, while traders who prefer to study the economic events that cause the market action mostly focus their efforts in studying fundamental analysis.Advantages of Fundamental Analysis: The greatest benefit derived from study of fundamental analysis is the ability to understand the causes that drive the market action. By understanding market dynamics, we can be confident in maintaining a position as long as the cause that triggered the trade exists.Advantages of Technical Analysis: Technical analysis is simple and straightforward, with tools available to everyone. In addition, technical tools are easier to interpret than fundamental indicators, the understanding of which usually requires a period of diligent study.And the answer of the question is that depending on the trader's time frame, and access to information, either fundamental analysis or technical analysis could be thought of as the most viable option. For a short-term trader, with only delayed information to economic data, but real-time access to quotes, technical analysis may be the preferred method. Alternatively, for the long-term trader, or perhaps for the trader that has access to up-to-the-minute news reports and economic data, fundamental analysis could be preferred.

CASE STUDY

How Do Non-Farm Payrolls Affect The US Dollar Exchange Rate?We will learn how Non-Farm Payrolls, one of the most important fundamental factors effects the US Dollar Exchange Rate particularly in the currency pair: EUR/USD (EUR is base currency)

Figure 18: Employment Situation Summary (HGI Training documents)

What it Measures: Non-Farm Payrolls (NFP) or Employment Change - indicates the amount of jobs from the construction, manufacturing and goods-producing sectors of the economy added or lost over the previous month. The data is for non-farm jobs because the agricultural sector of the economy includes seasonal hiring during the harvest which would distort the data.Unemployment Rate indicates the rate of unemployment prevailing in the United States as a percentage of the U.S. work force currently unemployed and seeking employment actively during the preceding month.ADP Non-farm Employment Change is a major provider of electronic payrolls for a large number of U.S. corporations. Its employment change report typically appears two days before the U.S. Government employment reports and so is an increasingly-watched indicator since it gives a preview to the key official reports.What effect it has: In general, better-than-expected U.S. employment numbers will raise the value of the U.S. Dollar against other currencies, while disappointing numbers will have the opposite effect. The NFP number is usually the most closely-watched of all U.S. economic data releases and certainly has the greatest significance among the employment numbers.Because employment generates consumer spending, the Non-Farm Payrolls and other employment indicators are extremely important to the economic well-being of the nation. Increased consumer spending stimulates the economy and in turn creates more jobs to meet greater consumer demand. Nevertheless, it can also prompt a rise in inflationary pressures which the Fed may respond to with higher rates.How often it is released: Non-Farm Payrolls and Unemployment Rate released monthly, typically on the first Friday after the end of the month reviewed.Why it is important: A reduction of jobs signaling a contracting U.S. economy will directly and adversely affect the currency, equity and debt markets of the United States. Also, a continuing trend toward job reduction will tend to signal a recession. Conversely, when jobs are expanding, the markets will usually react favorably to that news. Furthermore, a strong increase in jobs could also raise inflationary tendencies, thereby leading the Federal Reserve to tighten interest rates.Basically, as more people file for unemployment benefits, fewer people have jobs and so this reduces consumer spending and causes a further slowdown in the economy. When fewer people file for unemployment benefits, this indicates an expanding economy and increases the probability of greater consumer spending.Its effects on the EUR/USD in current months: As mentioned above, U.S. employment numbers has positive correlation with the value of the U.S. Dollar against other currencies. It means that if the employment numbers is higher than expected, the EUR/USD index will decrease.

Figure 19: The effect of Non-Farm Payrolls in the United States in March 2014, released 4th April (HGI Trading platform, demo account)Non-Farm Payrolls was 203K, higher than the previous month number but the unemployment rate (higher impact) was 6.7% more than the Februarys rate by 0.1%. It was not good for the US economy and their currency. The value of USD decreased, then EUR/USD index increased.

Figure 20: The effect of Non-Farm Payrolls in the United States in April 2014released 2nd May (HGI Trading platform, demo account)The 288,000 gain in employment marked the biggest upside surprise since February 2012 and followed a 203,000 increase the prior month, Labor Department figures showed today in Washington. Unemployment dropped to 6.3 percent, the lowest level since September 2008. (www.bloomberg.com) (282K was revised from 288K). A drop in the EUR/USD exchange rate of 35 pips from 1.3862 to 1.3827.

Figure 21: The effect of Non-Farm Payrolls in the United States in May 2014 5th June (HGI Trading platform, demo account)

Figure 22: The effect of Non-Farm Payrolls in the United States in June 2014 released 4th July (HGI Trading platform, demo account)In May and June of 2014, all Employment Change and Unemployment Ratio had good signals for USD then the EUR/USD exchange rate decreased dramatically as a result.

CONCLUSIONTrading foreign currencies is a challenging and potentially profitable opportunity for many investors. And thanks to the Internet, tens thousands of individual traders and investors all over the world are discovering the excitement and challenges of online trading in the FOREX market in every single moment. Not being out of the trend, Vietnamese investors and traders are becoming more and more educated, experienced, market-sensitive, decisive and interested in this superior market.To satisfy the exigent needs of many investors and traders and the development of financial market in Vietnam in general, enterprises like HGI are trying their best to perfect the operating system, service, product and internal capacity as well. Being predicted to make a great explosion in development in the near future, it is obviously that FOREX market will raise HGI to a new position in the financial market of Vietnam. Moreover, with a stable speed of growth at the moment, HGI is firmly believed to achieve their long-term goal in many new markets.During my 4-week-internship, with all of the knowledge gained, I want to show my gratitude to the Business Department 8 where I receive such a great and kind help to complete this report and perfect myself.However, 4 weeks is still quite short for me to have my research fully perfected. So I hope to receive review, recommendation and comments for this report and my better work in the future so far.

Reference1. Web pages:BabyPips, (2014). Which Type of FOREX Analysis is Best? | FOREX Trading. [online] Available at: http://www.babypips.com/school/kindergarten/three-types-of-analysis/which-type-of-analysis-is-best.html

CMS FOREX, (2014). Fundamental Factors for FOREX Trading Strategies. [online] Available at: http://www.cmsfx.com/en/FOREX-education/online-FOREX-course/chapter-2-fundamental-factors/fundamental-analysis/

FOREXfactory.com, (2014). FOREX Factory. [online] Available at: http://FOREXfactory.com/

http://www.investopedia.com/

http://hgi.com.vn/

http://www.bloomberg.com/news/2014-05-02/payrolls-in-u-s-rise-by-most-since-2012-unemployment-at-6-3-.html

2. Books and other documents:

Currency Trading For Dummies. (2014). 1st ed. Wiley Publishing, Inc. Technical Analysis in Forex A Strategy for Individual Trader in Intra-Day Trading - Miikka Linden FINANCIAL INVESTMENT IN COMMODITIES MARKETS: POTENTIAL IMPACT ON COMMODITY PRICES & VOLATILITY Institute of International Finance

Dinh Tien ManhA20 High quality Finance and Banking