An averaging of economic forecasts predicts a 3 percent US economic growth for the current quarter. So, it appears that things are getting better. Now that the worst is supposedly past, what does the future hold for various currency pairs? Which currencies will slide and which currencies will thrive? And which currency pairs will experience extreme fluctuations? What will be your Forex strategy in the post recession era where bailouts occurred in virtually every economy? What will be your Forex strategy when both sides of every currency pair have taken on huge amounts of debt?
We read the other day about the Russian government bailing out a large company with virtually no clear set of rules about how they may or may not get any money back. Although the US is concerned about the “too big to fail” policy that may have set up the recent financial debacle, the Chinese apparently are embracing it with both arms.
Who will emerge strong and have the stronger side of currency pairs in the coming years? We saw recently that short and medium term US securities are selling well. It would appear that some have faith in the US system, with all of its failings, as being more transparent and likely to succeed. One thinks of Japan, seemingly, ready to conquer the world economically twenty years ago and then promptly going into a prolonged economic slowdown because of hidden debt.
How currencies are managed, and the degree of transparency of an economy, are important to take into account in a Forex strategy. Relative values of currency pairs do not just hinge upon gross national product and national debt. Currency pair relative values also hinge upon expectations of sound fiscal management and transparency in financial dealings. A Forex strategy that takes these factors into consideration will likely succeed while a more narrowly focused Forex strategy will be more likely to fail.
A Forex strategy that takes economic transparency and good governance into account will more likely be able to pick trends in currency pairs successfully. More importantly a Forex strategy that is more knowledgeable is more likely to anticipate seemingly abrupt changes in relative currency pair values as economic problems cause obvious problems in “non-transparent” economies. A knowledgeable Forex strategy will help keep you from being surprised and help you take advantage of swings in currency pair values whether the news is another bailout or the collapse of a country’s economy.
Bailouts in the full light of day in the USA are one thing and a bailout that mimics those in the USA but really just means a political payoff to the “good old boys” in a country with corrupt governance is another. It took Western Europe, Japan, and the United States well over a hundred years to come to workable laws concerning property, trading, economic policy and the like. A free press has a lot to do with success in these matters. Seeing into what was going on in China or Russia used to be nearly impossible. Now, with more open borders it is easier, but still nowhere nearly as easy as dealing with Great Britain, the European Union, or Switzerland.
Remember, Forex trading profits come from a sound and knowledgeable Forex strategy.
