US DOLLAR TRADING – WE LEARN HOW TO TAKE PROFIT
US dollar has been the major reserve currency during a long time period. It is the most stable and reliable world currency. Dominance of the US dollar has being proved throughout its history by purchasing American bonds and investments in the American economy. As the years go by this strategy proves its case. However, Forex market allows traders to earn from devaluation of the stable currency. For most traders it is an opportunity to trade successfully. What should we pay attention to if the dollar is losing its strength? Even a beginning trader can detect the downturn of the greenback. We should notice the alteration of GDP, consumer price index, unemployment and jobless claims rates, the values of the major share indices, reaction of the Federal Reserve System, i.e. changes of all those indicators which show the state of the US economy. If the interest rate comes down and the national debt grows against the background of raw materials price surge, it means the start-up of the dollar’s weakening.
We should also take a note of the economic situation in other developed countries and behavior of their national currencies. For instance, the demand for the Japanese yen would increase if the Japanese economy registers the growth and goods export volume rises when the dollar is weak. The same situation would be observed with the European currencies against the US dollar if European economies show relative stability. Please pay attention to the Swiss franc, which on the strength of its peculiarity is being stable regardless of the fluctuations occurring in other currency pairs. It can serve as a signal for trader to enter the market. Taking into account the fact that as a rule prices on the raw materials market are measured in dollars, such strategy should be followed trading on the raw materials market. Everybody knows dependence of the US dollar on the oil prices. When greenback is falling, it is recommended to start working with other currencies such as Canadian or Australian dollars.
Some traders focused on new and rapidly developing currencies – Brazil real or Chinese Yuan, but one should be dead sure in his/her emotional state before entering the marker with these currencies especially when the US dollar behavior is unpredictable. Trader should know the exact moment of the dollar weakening verge.
Stock market traders should remember that when the situation is getting worse some foreign markets can bring them significant profit.
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