Английский язык. Практический курс для решения бизнес-задач - Нина Пусенкова

Technical analysis is a statistical and mathematical analysis of previous quotes and a prognosis of coming prices. A number of technical indicators have been installed into the PRO-CHARTS trading system. Analyzing the indicators one can come to the conclusion about further movements of the quoted currencies.

Fundamental analysis is an analysis of current situations in the country of the currency, such as its economy, political events, and rumors. The country’s economy depends on the rate of inflation and unemployment, on the interest rate of its Central Bank, and on tax policy. Political stability also influences the exchange rate.

At the same time one should not consider fundamental analysis just as an analysis of the economic situation in the country itself. A far bigger role in the FOREX market belongs to the expectations of the market participants.

Various prognoses and bulletins, issued by the participants, have a strong influence on the expectations. Very often an effect of the so-called self-fulfilling prophecy occurs when market players raise or lower the exchange rates according to the prognosis. But a deep and thorough fundamental analysis is available only for big banks with a staff of professional analysts and constant access to a wide field of information.

Reading a foreign exchange quote may seem a bit confusing at first. However, it’s really quite simple if you remember two things: 1) The currency listed first is the base currency and 2) the value of the base currency is always 1.

The USD is the centerpiece of the Forex market and is normally considered the ‘base’ currency for quotes. In the «Majors», this includes USD/JPY, USD/CHF and USD/CAD. For these currencies and many others, quotes are expressed as a unit of $1 USD per the second currency quoted in the pair. For example, a quote of USD/JPY 110.01 means that one U.S. dollar is equal to 110.01 Japanese yen.

When the U.S. dollar is the base unit and a currency quote goes up, it means the dollar has appreciated in value and the other currency has weakened. If the USD/JPY quote increases to 113.01, the dollar is stronger as it will now buy more yen than before.

The three exceptions to this rule are the British pound (GBP), the Australian dollar (AUD) and the Euro (EUR). In these cases, you might see a quote such as GBP/USD 1.7366, meaning that one British pound equals 1.7366 U.S. dollars. In these three currency pairs, a rising quote means a weakening dollar, as it now takes more U.S. dollars to equal one pound, Euro or Australian dollar.

Currency pairs that do not involve the U.S. dollar are called cross currencies, but the premise is the same. For example, a quote of EUR/JPY 127.95 signifies that one Euro is equal to 127.95 Japanese yen.

When trading forex you will often see a two-sided quote, consisting of a ‘bid’ and ‘offer’. The ‘bid’ is the price at which you can sell the base currency (at the same time buying the counter currency). The ‘ask’ is the price at which you can buy the base currency (at the same time selling the counter currency).

Foreign exchange quotes are a relation between currencies.

USDJPY – the cost of $1 in Japanese yens.

EURUSD – the cost of Euro 1 in US dollars.

That is, quotes are expressed in the units of the second currency for a unit of the first one. For example, quote USDJPY 108,91 shows that $1 costs 108,91 Japanese yens. Quote EURUSD 0.9561 shows that 1 Euro costs 0.9561 US dollars.

The last figure in the quote is called «pip». The cost of the pip is different for every currency, and depends on the leverage and current quote.

GBPUSD and EURUSD are direct quotes, i.e. when the chart goes up, GBP and EUR become more expensive, and when it goes down, the currencies become cheaper. USDCHF and USDJPY are backward quotes, and when the chart grows, prices on CHF and JPY fall, and when the chart goes down, the prices grow.

On direct quotes you buy according to ASK and sell according to BID. With backward quotes, you buy according to BID and sell according to ASK.

Participants of a Foreign Exchange Market

Commercial banksconduct the main volume of exchange transactions. Other participants of the market have their accounts at the banks, conducting necessary conversion transactions. Banks accumulate the combined needs of the market in exchange conversions as well as in calling and distributing money, breaking with it into new banks. Besides satisfying clients’ requests, banks can operate independently, using their own assets. A forex market is a market of interbank dealings, and one should bear in mind the existence of an interbank foreign exchange market. In international forex markets, international banks with the daily volume of transactions of billions dollars have the biggest influence. These are Barclays Bank, Citibank, Chase Manhattan Bank, Deutsche Bank, Swiss Bank Corporation, Union Bank of Switzerland, etc.

Exchange markets. Exchange markets do not work in a definite building and they do not have definite business hours. Thanks to the development of telecommunications most of the leading financial institutions of the world use services of exchange markets directly and via mediators 24 hours a day. The biggest international exchange markets are based in London, New York and Tokyo. In some transitional economies there are exchange markets for currency exchange by juristic persons and for forming a market exchange rate. The state usually regulates the exchange rate in an active manner, using the compactness of the exchange market.

Central banks control currency reserves, realize interventions, and regulate the interest rate in the national currency. The central bank of the U.S., the US Federal Reserve Bank, or «FED», has the greatest influence in the international exchange markets. It is followed by the central banks of Germany (the Deutsche Bundesbank or BUBA) and of Great Britain (the Bank of England, nicknamed the «Old Lady»).

Firms that conduct foreign trade transactions. Companies participating in international trade have a stable demand for foreign currency (importers) and supply (exporters). These organizations do not have direct access to exchange markets, and they conduct their conversion and deposit transactions via commercial banks.

Investment funds represented by various international investment, pension, and mutual funds, insurance companies, and trusts, realize the policy of diversified portfolio management by placing their money in government or corporate securities. The fund Quantum owned by George Soros executes successful exchange speculations. Big MNCs, such as Xerox, Nestle, GM that make FDI, also are firms of this kind.

Broker companies bring together a buyer and a seller of foreign currency and conduct a conversion dealing between them for a broker’s fee. In the forex market there is no fee as a percent from the sum of a transaction, or as a sum agreed in advance. Usually broker companies quote currency with a spread, which includes their fee. A broker company is a place where the real exchange rate is formed according to closed deals. The biggest international broker companies are Lasser Marshall, Harlow Butler, Tullett and Tokio, Coutts, and Tradition.

Private persons. Natural persons realize a wide range of non-commercial transactions in the sphere of foreign tourism, transfers of salaries, pensions, royalties, buying and selling foreign currency.

Source: www.pro.forex.com

Essential Vocabulary

1.foreign exchange market (FOREX, FX) – валютный рынок

2.Greenwich Mean Time (GMT) – среднее время по гринвичскому меридиану

3.open position – открытая позиция

4.closed position – закрытая позиция

5.keep a position – держать позицию

6.credit line – кредитная линия

7.marginal (leverage) trading – торговля без внесения всей суммы сделки

8.speculator n – спекулянт; игрок на бирже

speculative a – спекулятивный

speculate v – спекулировать; играть на бирже

9.margin deposit – маргинальный депозит

10.pip n – «пип» (минимальное изменение курса)

11.limit order – лимитная (ограниченная) заявка

12.stop order – «стоп»-заявка

13.fundamental analysis – фундаментальный анализ

14.technical analysis – технический анализ

15.self-fulfilling prophecy – самореализующееся предсказание

16.quote n – котировка

quote v – котировать

17.base currency – базовая валюта

18.cross currency – кросс-валюта

19.offer (ask) price – цена предложения (продажи)

20.direct quote – прямая котировка

21.backward quote – обратная котировка

22.commercial bank – коммерческий банк

23.interbank foreign exchange market – межбанковский валютный рынок

24.transitional economy – страна с переходной экономикой

25.juristic person – юридическое лицо

26.US Federal Reserve Bank (Fed) – Федеральный резервный банк (США)

27.Deutsche Bundesbank – Немецкий федеральный банк

28.Bank of England (ВЕ, ВоЕ) – Центральный банк Великобритании

29.mutual fund – взаимный фонд

30.trust n – траст, трест

31.spread n – спрэд

32.private (natural) person – физическое лицо

Exercise 1. Answer the following questions.

1. What are the characteristics of the forex market? 2. What does marginal trading mean? 3. How can you regulate your profits and losses in the course of trading? 4. What is technical analysis and on what premises is it founded? 5. What is fundamental analysis? 6. What are the principles of reading the FX quote? 7. Who are the key FX market players? 8. What are the merits of the forex market?

Exercise 2*. Which of the following statements are not correct and why?

1. Forex market is the biggest liquid financial market. 2. A single participant in the market can strongly influence its dynamics. 3. The idea of marginal trading stems from the fact that in FOREX speculative interests can be satisfied only with a real money supply. 4. The major currencies traded in FOREX are traded against Euro. 5. In the course of trading you can fix your profit or cut off your losses according to the commands LIMIT and STOP. 6. Most small and medium players in financial markets use technical analysis. 7. Fundamental analysis is an analysis of current situations in the country of the currency. 8. The currency listed second in a foreign exchange quote is the base currency. 9. Currency pairs that do not involve the U.S. dollar are called cross currencies. 10. Commercial banks conduct the main volume of exchange transactions. 11. Exchange markets work in a definite building and have definite business hours. 12. A broker company, having the information about the asked rates, is a place where the real exchange rate is formed according to closed deals.

Exercise 3*. Find terms in the text that match definitions given below and make sentences of your own with each term.

1. the price at which the market is prepared to sell a specific currency in a foreign exchange contract or cross currency contract

2. the first currency in a currency pair

3. the price at which the market is prepared to buy a specific currency in a foreign exchange contract or cross currency contract

4. a government or quasi-governmental organization that manages a country’s monetary policy

5. a transaction fee charged by a broker

6. the second listed currency in a currency pair

7. a foreign exchange transaction in which one foreign currency is traded against a second foreign currency

8. analysis of economic and political information with the objective of determining future movements in a financial market

9. action by a central bank to affect the value of its currency by entering the market

10. an order with restrictions on the maximum price to be paid or the minimum price to be received

11. the ability of a market to accept large transaction with minimal to no impact on price stability

12. a unit to measure the amount of the deal

13. the smallest unit of price for any foreign currency

14. an indicative market price, normally used for information purposes only

15. the process by which a trade is entered into the books and records of the counterparts to a transaction

16. the difference between the bid and offer prices

17. an effort to forecast prices by analyzing market data, i.e. historical price trends and averages, volumes, open interest, etc

18. the cost of buying or selling a financial instrument

Exercise 4*. Fill in the blanks using terms given below.

Futures Trading at Chicago Mercantile Exchange

The history of modern futures trading is traced to the grain trade in the Midwest U.S. in the 1800s. Grain merchants developed the first formal…… in 1848 in Chicago. These merchants were looking for a system to standardize trading…….. While forward……… were initially utilized, these privately……… agreements were not standardized and sometimes……….. defaulted. In an effort to improve the reliability of the system, futures contracts were developed, which were standardized for quality, quantity, and time and place for…….. of the agricultural products that were being traded.

Chicago Mercantile Exchange (CME) pioneered the first…….. futures contracts in 1972. In March 2003, the total………value of……. trading at CME was U.S. $347.5 billion. Currency futures are……… on the………. cash and forward exchange rates.